Moody's changes outlook on four Adani Group firms to 'negative'
These rating actions, Moody's said, follow the significant and rapid decline in the market equity values of the Adani Group companies following the recent release of a report from a short-seller highlighting governance concerns in the Group.
- Feb 10, 2023,
- Updated Feb 10, 2023 4:42 PM IST
Moody's Investors Service on Friday said it has changed the outlook on four Adani group companies to 'negative' from 'stable', while maintaining the stable outlook on four other group companies. It, however, maintained its ratings on all eight Adani group companies.
The four companies whose outlook has been changed to 'negative' are Adani Green Energy, Adani Green Energy Restricted Group, Adani Transmission Step-One and Adani Electricity Mumbai.
Adani Ports and Special Economic Zone, Adani International Container Terminal, Adani Green Energy Restricted Group and Adani Transmission Restricted Group 1 are four Adani group companies whose outlook stayed stable, Moody's said.
These rating actions, Moody's said, follow the significant and rapid decline in the market equity values of the Adani Group companies following the recent release of a report from a short-seller highlighting governance concerns in the Group.
Moody's changed the outlook for Adani Green to 'negative' from 'stable', while keeping its rating at Ba3 ratings. Moody's said the affirmation of Adani Green's senior secured bond rating reflects its predictable cash flow backed by long-term power purchase agreements (PPAs), its large and diversified portfolio of solar and wind generation projects, and its very high financial leverage.
"The change in the outlook to negative on Adani Green considers the company's large capital spending program and dependence on sponsor support, potentially in the form of subordinated debt or shareholder loans, which will likely be less certain in the current environment," Moody's said.
The negative outlook, it said, also factors in the company's significant refinancing needs of around $2.7 billion in fiscal year ending March 2025 (fiscal 2025) and limited headroom in its credit metrics to manage any material increase in funding costs.
In the case of Adani Electricity Mumbai, the change in Moody's outlook to negative reflects the likely reduction in its funding access and reduced ability to manage any material increase in funding costs given the limited headroom in its credit metrics under Moody's base case scenario. The change in the outlook on Adani Green Energy Restricted Group to 'negative' factors in the refinancing risk associated with $500 million of bonds maturing in December 2024. Moody's said it recognises that the project finance structure of Adani Green Energy Restricted Group provides protection from any contagion risk from the broader Adani Group.
On Adani Transmission Step-One, Moody's said the company's senior secured bond ratings reflects the company's close credit linkage with its wholly-owned parent, Adani Transmission, owing to the parental guarantee provided by Adani Transmission over the rated bonds and the event of default provisions linked to Adani Transmission's solvency.
Adani Transmission's credit profile, in turn, reflects the predictable revenue from its diversified portfolio of quality regulated or contracted transmission and distribution assets, as well as the group's aggressive growth strategy and the incremental debt required to fund its capital spending.
Moody's said the affirmation of Adani Ports' issuer ratings considers the company's strong market position as the largest port developer and operator in India by cargo volume and its strong liquidity and financial profile.
The stable outlook on the ratings reflects Moody's expectation that Adani Ports would continue to generate relatively steady cash flow over the next 12-18 months and would be able to realign its capital spending plans in the event of a liquidity squeeze. Moody's said it could upgrade Adani Ports' rating if the sovereign rating is upgraded; the company continues to improve its operating performance and business mix; and it undertakes permanent leverage reduction, with its FFO/debt above 22 per cent on a sustained basis.
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Moody's Investors Service on Friday said it has changed the outlook on four Adani group companies to 'negative' from 'stable', while maintaining the stable outlook on four other group companies. It, however, maintained its ratings on all eight Adani group companies.
The four companies whose outlook has been changed to 'negative' are Adani Green Energy, Adani Green Energy Restricted Group, Adani Transmission Step-One and Adani Electricity Mumbai.
Adani Ports and Special Economic Zone, Adani International Container Terminal, Adani Green Energy Restricted Group and Adani Transmission Restricted Group 1 are four Adani group companies whose outlook stayed stable, Moody's said.
These rating actions, Moody's said, follow the significant and rapid decline in the market equity values of the Adani Group companies following the recent release of a report from a short-seller highlighting governance concerns in the Group.
Moody's changed the outlook for Adani Green to 'negative' from 'stable', while keeping its rating at Ba3 ratings. Moody's said the affirmation of Adani Green's senior secured bond rating reflects its predictable cash flow backed by long-term power purchase agreements (PPAs), its large and diversified portfolio of solar and wind generation projects, and its very high financial leverage.
"The change in the outlook to negative on Adani Green considers the company's large capital spending program and dependence on sponsor support, potentially in the form of subordinated debt or shareholder loans, which will likely be less certain in the current environment," Moody's said.
The negative outlook, it said, also factors in the company's significant refinancing needs of around $2.7 billion in fiscal year ending March 2025 (fiscal 2025) and limited headroom in its credit metrics to manage any material increase in funding costs.
In the case of Adani Electricity Mumbai, the change in Moody's outlook to negative reflects the likely reduction in its funding access and reduced ability to manage any material increase in funding costs given the limited headroom in its credit metrics under Moody's base case scenario. The change in the outlook on Adani Green Energy Restricted Group to 'negative' factors in the refinancing risk associated with $500 million of bonds maturing in December 2024. Moody's said it recognises that the project finance structure of Adani Green Energy Restricted Group provides protection from any contagion risk from the broader Adani Group.
On Adani Transmission Step-One, Moody's said the company's senior secured bond ratings reflects the company's close credit linkage with its wholly-owned parent, Adani Transmission, owing to the parental guarantee provided by Adani Transmission over the rated bonds and the event of default provisions linked to Adani Transmission's solvency.
Adani Transmission's credit profile, in turn, reflects the predictable revenue from its diversified portfolio of quality regulated or contracted transmission and distribution assets, as well as the group's aggressive growth strategy and the incremental debt required to fund its capital spending.
Moody's said the affirmation of Adani Ports' issuer ratings considers the company's strong market position as the largest port developer and operator in India by cargo volume and its strong liquidity and financial profile.
The stable outlook on the ratings reflects Moody's expectation that Adani Ports would continue to generate relatively steady cash flow over the next 12-18 months and would be able to realign its capital spending plans in the event of a liquidity squeeze. Moody's said it could upgrade Adani Ports' rating if the sovereign rating is upgraded; the company continues to improve its operating performance and business mix; and it undertakes permanent leverage reduction, with its FFO/debt above 22 per cent on a sustained basis.
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