(Bloomberg) -- Citigroup Inc.'s wealth arm has stopped accepting securities of Gautam Adani's group of firms as collateral for margin loans as banks ramp up scrutiny of the Indian tycoon's finances following allegations of fraud by short seller Hindenburg Research.
Most Read from Bloomberg
Merck Covid Drug Linked to New Virus Mutations, Study Says
Porsche Blunder Puts $148,000 Sportscar on Sale for Just $18,000
National Archives Releases Records Tied to Trump Classified Documents
Plenty of Americans Are Drinking Bleach, Still for Sale on Amazon
8,000 Layoffs Don't Exactly Scream Family Values
The US lender's move to restrict lending comes after a similar change at Credit Suisse Group AG, as Adani's beleaguered empire becomes further engulfed in crisis.
"In recent days, we have seen a dramatic price drop of Adani issued securities," Citigroup said in an internal memo seen by Bloomberg News. "Stock and bond prices have plummeted following the negative news around the group's financial health."
The bank said in the memo it has decided to remove lending value "to all Adani issued securities with immediate effect." Based on its estimates, the impact of this decision to its margin lending portfolio is limited, it said.
A spokesman for Citigroup declined to comment.
Bonds of the Indian billionaire's flagship firm plunged to distressed levels in US trading, and the company abruptly pulled a record domestic stock offering after shares in the Adani group suffered a $92 billion crash.
When a private bank cuts lending value to zero, clients typically have to top up with cash or another form of collateral and if they fail to do so, their securities can be liquidated.
At Credit Suisse, the Swiss lender's private banking arm has assigned a zero lending value for notes sold by Adani Ports and Special Economic Zone, Adani Green Energy and Adani Electricity Mumbai Ltd., according to people familiar with the matter, who asked not to be identified discussing private information.
Most Read from Bloomberg Businessweek
Wall Street: We Want Lower Rates. The Fed: Not So Fast
A 3D Printer Isn't Cool. You Know What's Cool? A 3D-Printing Factory
Sean Penn's Disaster-Relief Charity Ended Up a Money Mess
A $500 Million Bet on Reinvigorating Japan's Aging Ski Industry
Spanish-Speaking Streamers Are the Hottest Thing on Twitch
©2023 Bloomberg L.P.
