A handful of global banks are reportedly reducing exposure to businesses owned by billionaire Gautam Adani while others are relatively less pessimistic about the group. What say the banks in the post-Hindenburg aftermath?
Following jarring allegations of fraud by Hindenburg Research last week, global banks are rapidly addressing concerns about exposure to Indian billionaire Guatam Adani’s businesses which span across ports, power plants, coal mines and more.
While some have reportedly made moves to cut exposure, others are less pessimistic about the Adani Group. So, what say the banks?
Reduced Exposure
On February 1, a «Bloomberg» report citing unnamed sources said that Credit Suisse’s private banking arm had assigned zero lending value for notes sold by Adani Ports and Special Economic Zone, Adani Green Energy and Adani Electricity Mumbai Ltd. Previously, the bank offered lending value of about 75 percent of Adani Ports notes, the report added.
Citi’s wealth unit also stopped accepting Adani Group securities as collateral for margin loans, adding that the removal would have limited impact on its margin lending portfolio.
«In recent days, we have seen a dramatic price drop of Adani-issued securities. Stock and bond prices have plummeted following the negative news around the group’s financial health,» according to a «Bloomberg» report citing an internal memo at Citigroup.
Adani Optimists
But not all global banks are expressing pessimism about securities issued by the Adani Group, particularly with regards to its bonds.
According to a note by J.P. Morgan analysts prior to the pullout of Adani’s share sale, the bank believes there is «eventual asset value» on «regulated ring-fenced assets», with a preference for bonds issued by Adani Electricity and the operating companies of Adani Green Energy Ltd.
Separately, Goldman Sachs told investors on a call that Adani debt had bottomed in the short term. The US lender said the bonds of Adani Ports & Special Economic Zone Ltd have become interesting at the current price due to the value of company assets, according to another «Bloomberg» report citing unnamed sources.
UBS, Barclays, Mizuho
There are still more banks that have been involved in related financial dealings, including Barclays which is part of a group that issued a $1 billion loan that was recently supported by collateral of $300 million in Adani-issued shares.
Mizuho Securities had previously managed debt issuance by Adani companies, according to public documents, and CEO Yoshiro Hamamoto told reporters on Thursday that the Hindenburg allegations are being examined.
Meanwhile, UBS CEO Ralph Hamers has said that he is not worried about the Swiss bank’s exposure to the Adani Group.