Jefferies, Barclays review partnership, Bank of Japan sticks with Adani

(Bloomberg) — Japan’s largest bank plans to maintain ties with billionaire Gautam Adani despite U.S. accusations of bribery, while other multinationals including Barclays Plc are re-opening Assess its exposure to the Indian conglomerate.

Mizuho Financial Group does not expect the latest incident surrounding Adani to have a lasting impact and intends to continue supporting the group, according to people familiar with the matter. Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group have no plans to withdraw and will be open to receiving new financing if needed in the future, people familiar with the matter said.

Tokyo-based spokesmen for the three lenders declined to comment. Representatives for Adani Group were not immediately available for comment.

Japan’s support underscores divisions among financial firms over Adani after he and others were accused of masterminding a $250 million scheme to bribe Indian government officials to win solar contracts. Adani’s vast Ports Power Group denies the accusations and calls them baseless. Its representatives have been meeting with lenders and investors to reassure them and explain its stance on the matter.

Some global banks concerned about reputational risks are limiting investments in one of India’s largest conglomerates, although the group is unlikely to make fresh funding requests for now. Capital-rich Japanese banks are pleased that they are backing cash-generating assets. People familiar with the matter said Adani has close ties to the government and any legal proceedings brought by the United States would take a long time.

Ben Charoenwong, assistant professor of finance at Insead in Singapore, said of banks’ risk tolerance after the financial crisis, “The Bank of Japan developed a sophisticated framework based on its experience in Southeast Asia in the 1990s. to assess emerging market risks. “Asian Financial Crisis. “Banks like MUFG and Sumitomo Mitsui Banking Corporation that view India as an important growth market are unlikely to significantly reduce their overall exposure to India,” although they may tighten processes or increase risk premiums on certain transactions .

Meanwhile, Barclays, which has long been Adani’s bank of choice, has now suspended new loans or financing to the group, according to people familiar with the matter.

The British bank has been gradually reducing direct lending and bond underwriting since short-seller Hindenburg Research targeted the company last year, Bloomberg reported earlier. Still, last year it provided part of a $394 million trade finance loan to an Adani unit for a solar module factory. Barclays was one of the bookrunners on a $409 million bond issued by Adani Green Energy Ltd earlier this year.

A Barclays spokesman declined to comment on its engagement with Adani or the status of its relationship with the group.

Jefferies Financial Group Inc., which had been backing Adani Group Inc. after Hindenburg accused it of fraud, said people familiar with the matter said it declined after further accusations emerged following the U.S. indictment. Financial Group Inc.) has not yet discussed a new deal with the group. The bank has not yet made a formal decision on whether to suspend or terminate trading and is awaiting a clear outcome on the allegations before launching new business, people familiar with the matter said.

Jefferies temporarily holds some Adani shares on its balance sheet as a market maker, but not as an investment in the company, people familiar with the matter said. Adani Group accounts for less than 4% of Jefferies’ India business, they added.

Last year, Jefferies India sold stakes in four Adani Group companies to Florida investment firm GQG Partners for $1.9 billion. Most recently, Jeffries served as chief manager at flagship Adani Enterprises Ltd. and other companies that raised $500 million in stock sales last month.

Representatives for the New York-based company declined to comment.

Meanwhile, at least two other major U.S. banks had planned to secure a small portion of debt financing from Adani Group in recent months but have now shelved those efforts, according to people familiar with the matter.

Japan’s largest banks, which recently raised their annual profit forecasts to a new record, have been prominent in some of the year’s biggest overseas bond deals by Indian companies such as Adani Group, data compiled by Bloomberg show. Most recently, they were one of the arrangers for Adani Green’s planned $600 million bond issuance, which was scrapped after the allegations became public.

Mizuho is not too concerned about the current investigation and has no intention of exiting the group, which has not withheld any payments, people familiar with the matter said. Mizuho Bank has provided financial support to Adani’s units operating ports and airports, which are a stable source of cash.

People familiar with the matter said Sumitomo and Mitsubishi UFJ are confident in the company’s ability to repay borrowings and do not expect business to be greatly affected.

Some Middle Eastern banks, such as Emirates NBD Bank PJSC, are as unfazed by their relationship with Adani as their Japanese counterparts, people familiar with the matter said. They have no plans to withdraw existing commitments and will provide fresh funding for future projects based on regular due diligence, the people said, adding that their funds are committed to high-quality assets in Adani’s portfolio. Emirates NBD declined to comment.

“Japanese and Middle Eastern banks, with access to relatively low-cost capital, are actively exploring global growth and diversification opportunities,” said Ashutosh Mishra, head of institutional sector research at Ashika Stock Broking Ltd. Asset-heavy Indian conglomerates like Adani provide strong Growth prospects. “

Adani’s dollar bonds and shares plunged immediately after the indictment, a sign that investors were alarmed by the rising risks. Over the past week, S&P Global Ratings, Moody’s Ratings and Fitch Ratings have all downgraded the credit outlook on some Adani companies to negative from stable. S&P cited concerns about access to financing and financing costs. Fitch also said it may downgrade Adani Ports and Special Economic Zone Ltd’s U.S. dollar bond rating to junk status.

Companies in other industries are also re-evaluating their relationships with Adani. TotalEnergies SE said it would not make any new investments in the group until the consequences of the U.S. prosecution are clarified. Meanwhile, Kenya canceled two Adani contracts worth about $2.6 billion following the accusations.

Shares of Adani Enterprises plunged 23% on November 21 following the U.S. move, but later recovered some of the losses. The stock rose this week after the company said Gautam Adani and his associates were not charged under the U.S. Foreign Corrupt Practices Act.

–With assistance from Baiju Kalesh, Harry Wilson, Jan-Henrik Förster, Taiga Uranaka, Catherine Bosley and Chanyaporn Chanjaroen.

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