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Sri Lanka finance, foreign ministries weigh accusations

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Fitch puts Adani bonds on negative watch

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Adani stock losses reach $33 billion

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Adani dollar bonds steady after three days of falls

By Uditha Jayasinghe, Scott Murdoch and Chris Thomas

Nov 26 (Reuters) - Sri Lanka is weighing U.S. bribery

accusations against Adani Group and Fitch put some company bonds

on a watch list for a possible downgrade, as fallout widens from

indictments of some key executives of the Indian conglomerate.

U.S. prosecutors have charged billionaire Gautam Adani, the

group's founder, his nephew Sagar Adani and six others for their

alleged roles in a $265-million scheme to bribe Indian officials

to secure power supply deals.

Adani Ports, India's largest private ports

operator, owns 51% of a new container terminal project expected

to begin operations next year in neighbouring Sri Lanka's city

of Colombo.

Sri Lanka's finance and foreign ministries were reviewing

the accusations, cabinet spokesperson Nalinda Jayatissa told

reporters on Tuesday, adding that the government would consider

all aspects of the group's projects in the Indian Ocean island.

Jayatissa declined to say how long it would take to assess

the ministerial reports.

The comments came days after a U.S. agency that agreed

to lend more than $550 million to the Sri Lankan port

development said it was reviewing the impact of the bribery

accusations against some key Adani executives.

The Adani Group has dismissed the accusations as "baseless

and denied", along with those made by the U.S. Securities and

Exchange Commission in a parallel civil case, adding it would

"seek all possible legal recourse".

On Tuesday, ratings agency Fitch also put some Adani Group

bonds on watch for a possible downgrade, citing the indictment.

Adani Energy Solutions Ltd, Adani Electricity

Mumbai and some of Adani Ports and Special Economic Zone

rupee and dollar bonds are now on "watch negative",

Fitch said in a statement.

Ratings on four Adani subsidiary senior unsecured dollar

bonds were downgraded from stable to negative, the agency said.

Adani stocks opened further down on Tuesday. Of 10 listed

companies that have lost about $33 billion in market value since

the indictment, Adani Green has been the hardest hit,

giving up about $9.7 billion.

The stock was down 7.5% on Tuesday.

A ratings watch negative signals a heightened probability of

a rating downgrade that could affect the pricing of hundreds of

millions of dollars worth of Adani's debt.

BUSINESS IMPACT

Fitch will monitor the U.S. investigation for any impact on

Adani's financial position, it added in Tuesday's statement.

Specifically, it would watch for "any material deterioration

in near- to medium-term funding access, including their ability

to roll over existing credit lines or access new facilities, as

well as potentially higher credit spreads," it said.

Rating agency S&P Global put Adani Ports, Adani Green Energy

and Adani Electricity on a downgrade warning due to

the U.S. indictments.

The reactions from the Sri Lankan government and Fitch come

a day after French oil major TotalEnergies said it

would halt financial contributions to its Adani Group

investments after last week's indictment.

In response, Adani Green Energy said on Tuesday there was no

new financial commitment under discussion with TotalEnergies and

that the French firm's decision would not have any material

impact on the company's operations or its growth plans.

The Indian conglomerate, however, has received support from

one of its main backers, GQG Partners. The

Australia-listed investment firm did not see the indictments

having a material impact on Adani businesses, it told clients in

a memo.

Except for Adani Green Energy, the group does not need to

raise capital at this point, it added in the memo, seen by

Reuters. But GQG warned that if Adani did need more funding, the

indictment would limit its ability to access foreign capital.

Any negative actions by the Indian government could have

meaningful implication for Adani, it added, though it believed

the government would maintain support for Gautam Adani.

GQG picked shares worth $1.87 billion in four Adani group

companies last year, shortly after a short-seller's critical

report sparked a stock rout.

GQG has a stake of nearly 20% across Adani Group companies,

amounting to about 6.1% of its total assets of $158.6 billion.

By Thursday GQG's total exposure fell to 5.2% of total assets.

GQG did not reply to a request for comment.

Adani dollar bonds steadied on Tuesday and prices rose

slightly after three days of heavy falls.

Prices on some of the more liquid Adani Ports and Special

Economic Zone debt maturing between 2027

and 2041 were up between

half a cent and 1.5 cents on the dollar. They have fallen about

8 cents to 12 cents since news of the indictment.

Leading ESG ratings provider Morningstar Sustainalytics said

it would review Adani Green Energy's ESG risks.

"No business, green or brown, can represent a good

investment opportunity without robust governance policies and

practices," Hortense Bioy, its head of sustainable investing

research, said in an email.