The indictment of Adani Group’s founder Gautam Adani by US prosecutors could renew questions over the ports-to-energy conglomerate’s governance practices and damage its reputation, S&P Global Ratings said Friday.

US prosecutors have charged Adani and seven others including his nephew Sagar, with agreeing to pay about USD 265 million in bribes to Indian government officials to obtain favourable terms for a solar power supply contract. Adani Group has denied all charges, calling them “baseless”, and said it would seek “all possible legal recourse”.

“The allegations could renew questions over the group’s governance practices and damage its reputation. We will watch for any signs of weaker funding access or concerns from existing lenders — which could be demonstrated by the lowering of funding limits, non-renewal of facilities, or significantly higher credit spreads,” S&P Ratings said in a note.

After the news of the indictment broke, equity and bond prices across Adani group companies have fallen sharply.

The group has cancelled a USD 600 million concluded bond sale.

This indictment is independent of, but follows, a short-seller report last year, which hit equity and bond prices across the group although these had subsequently recovered. The group has denied the allegations and asserted that they are baseless.

The group needs regular access to both equity and debt markets given its large growth plans, in addition to its regular refinancing.

“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. We note that the rated entities have no immediate and lumpy debt maturities,” the rating agency said. “If allegations of illegal activities or misleading statements prove true, we could assess the group’s governance more negatively.” Separately, research firm CreditSights said refinancing for Adani Group’s green energy business is the biggest concern in the near term. “Funding channels will inevitably squeeze across the Adani Group, with creditors likely to reduce or limit their group-wide exposure.” Concerns are most for Adani Green Energy Ltd “given it has the weakest liquidity and credit fundamentals,” it said, pointing to short-term debt of about USD 2 billion, largely in the form of project loans, at the conglomerate’s green energy unit.

S&P Global Ratings revised to negative the credit outlook for multiple Adani Group entities on Friday, citing funding access and financing-cost concerns.

“A US indictment of three board representatives of an unrated Adani group entity could affect investor confidence in other Adani group entities (because the founder is on the board of multiple entities within the group), thereby potentially impairing their funding access and increasing their funding costs,” S&P said.

US prosecutors allege that Adani and others were involved in a USD 265 million bribery scheme that breached the anti-bribery compliance policy through misrepresentation to investors in an offshore bond.

“In our view, this could further raise questions regarding the management and governance of various Adani group entities. The indictment is independent of, but follows, a short seller report that led to investigation by the Indian Supreme Court and India’s capital market regulator,” S&P said.

Stating that because of the potential impact across the wider Adani Group, S&P said it has revised to negative the outlook on Adani Electricity Mumbai Ltd (Adani Electricity) and Adani Ports and Special Economic Zone Ltd (Adani Ports). “We also affirmed our ‘BBB-‘ ratings on these entities.” Project finance entity Adani Green Energy Ltd Restricted Group 2 (AGEL RG2) is a subsidiary of Adani Green Energy Limited (AGEL), the entity linked to the allegations.

“Although it is ring-fenced from the parent, we revised to negative the outlook on AGEL RG2 and affirmed our ‘BB+’ issue rating,” the rating agency said. “The negative outlook on these entities indicates that, in our view, their cash flows could be materially affected if their funding access weakens, their funding costs rise significantly, or the allegations are proven, in addition to our assessment of their governance and business profiles.” S&P said it believes that if the allegations are proven, it could have some bearing on the company’s operations over time.

“This could occur if there is a review of relationships with the government agencies that award concessions and licenses, or with offtakers and counterparties such as Solar Energy Corp of India (SECI), state distribution companies, and joint venture partners,” it said.