DEBT MATURITIES
In a statement in April last year, Adani said global banks including Barclays, Deutsche Bank, Mizuho, Mitsubishi UFJ Financial Group, SMBC Group and Standard Chartered reaffirmed confidence in the Adani group after it was hit by a short-seller attack.
Spokespersons for the three Japanese banks declined to comment, while others did not immediately respond.
S&P Global Ratings said in a note on Friday the indictment could affect investor confidence in Adani group entities, thereby potentially impairing their funding access and increasing their funding costs.
“We believe domestic, as well as some international banks and bond market investors, look at Adani entities as a group, and could set group limits on their exposure. This may affect the funding of rated entities,” it said.
The rating agency, however, added that the rated entities have “no immediate and lumpy” debt maturities.
Some global banks with ties to Adani are parsing through bond and loan documentations to see if it exposed them to a risk of default or created a liability if investors decided to demand their money back, said another banker.
But there was not a lot of legroom in documentation for either investors or the bankers to force the company to pay them back since there was no conviction yet, said lawyers familiar with corporate bond and loan agreements.
Om Pandya, a Houston-based capital markets partner at Clifford Chance, said continued payment of interest by a borrower would also typically undermine any potential argument by creditors looking at clauses in loan or bond documentations to trigger a default.
The most likely liability facing the banks is civil liability from investors introduced to Adani through the banks, said John Joy, managing attorney at FTI Law, a law firm that specializes in Foreign Corrupt Practices Act (FCPA) violations.
“Civil litigation is a lengthy process, and it is possible that during discovery investors could uncover involvement that has not been disclosed by the SEC (Securities and Exchange Commision) or DOJ (Department of Justice),” he said.
Adani has not been arrested yet and US prosecutors would need to ask the Indian government to extradite him under the terms of the countries’ extradition treaty. Adani could fight extradition, and it is unclear how long the process might take.
“There’s been no conviction … but if you’re a risk officer at a bank with exposure to Adani, maybe you’re getting a little bit nervous,” said Ed Al-Hussainy, head of emerging market fixed income research at Columbia Threadneedle.
