“The downgrade reflects elevated risk of debt restructuring over the next few months because VRL has not made any meaningful progress on refinancing its upcoming debt maturities, in particular the $1 billion bonds maturing each in January 2024 and August 2024,” Kaustubh Chaubal, the lead Moody’s analyst on the conglomerate, said Tuesday.
Moody’s has downgraded corporate family rating for the London-based commodity major to Caa2 from Caa1 earlier. It has also downgraded rating to Caa3 from Caa2 earlier for its senior unsecured bonds as well as bonds issued by its wholly-owned subsidiary, Vedanta Resources Finance II Plc.
Debt obligations at Vedanta Resources – the parent of Indian-listed Vedanta Ltd – include a $1 billion bond due in January, $950 million bonds due in August, and $1.2 billion maturing in March 2025, apart from other loan repayments.
“VRL’s credit quality is constrained by its weak liquidity because of large refinancing needs and interest expense amid tightening financing conditions in global capital markets,” Moody’s said.
The company has also a limited headroom to raise financing given that its entire shareholding in Vedanta Ltd is already pledged. Vedanta Ltd’s entire stake in Hindustan Zinc, too, is pledged. “VRL’s Caa category CFR reflects the company’s unsustainable capital structure, aggressive risk appetite and weak financial management,” Moody’s said.Vedanta Resources will also be hindered as a softening commodity price environment will limit the ability of its operating subsidiaries to generate cash flows.
The company’s plan for the restructuring of its bonds has met with some resistance from investors, ET reported earlier this week. It has been in discussions with bondholders to change timelines for repayment and some other terms.
