Credit Suisse Assigns Zero Lending Value to Adani Bonds

Delhi: Credit Suisse Group AG, a Switzerland-based investment bank and financial services firm, has halted acceptance of Adani group bonds as collateral for margin loans to its private banking clients, Bloomberg reported. The development comes after allegations of fraud by Hindenburg Research.

Credit Suisse’s private banking arm has assigned a zero lending value to notes sold by Adani Ports and Special Economic Zone, Adani Green Energy, and Adani Electricity Mumbai Ltd, Bloomberg reported quoting sources. The lender had previously offered a lending value of about 75% for the Adani Ports notes. Adani Group’s stocks crashed after the news.

According to the report, other banks are still lending against Adani’s debt. At least two European private banks have kept the lending level the same as before, with one of them offerings to lend between 75% to 80% for Adani Ports dollar bonds.

After a private bank cuts the lending value to zero, the clients generally have to top up with cash or other forms of collateral. If they fail to top up, their securities can be liquidated, the report said.

Since Hindenburg Research alleged that the conglomerate used a network of firms in tax havens to overstate revenue and stock prices,

the group’s bonds dipped to record lows after the allegations. However, the group has since recovered some losses after Adani Enterprises Ltd. finished a $2.5 billion share sale with support from existing shareholders and institutional investors, Bloomberg reported.

Listing Credit Suisse as a backer, Adani had detailed its domestic and international banking relationships in the rebuttal of the Hindenburg allegations.

The Bloomberg report further said that decisions at the private banking arm are between the firm and its clients and do not impact the Swiss lender’s other banking relationships with the Adani group of companies.