A deep dive masterclass on sovereign debt restructuring, to be conducted virtually by Asian high yield bond expert Florian Schmidt.

30 June 2022 (Thu), 5pm Singapore/HK time

Vedanta Resources’ credit rating outlook has been revised up to stable from negative by S&P Global Ratings while maintaining the current rating of B-. The rating action comes as the rating agency believes that refinancing risks of the company have reduced and considers its offer to increase its ownership in its subsidiary Vedanta Ltd. as a positive. Vedanta Resources is likely to conclude its open offer to acquire an additional 10% stake in its 55%-owned subsidiary Vedanta Ltd. by March this year, for which it will incur a debt of ~$800mn. The company had previously increased its stake from 50.1% to 55% funded with debt of $400mn. This debt is expected to be offset by the benefits of a more efficient corporate structure and improved liquidity through access to cash flows of its subsidiary. The company has good liquidity as its free cash flows are expected to be ~$1.6-$1.8bn till March 31, 2022 and since its subsidiary, Hindustan Zinc and Vedanta Ltd hold cash worth $4.8bn. The reduced refinancing risks on account of the conglomerate’s strong earnings as well as the recent action by the company to redeem a part of its bonds maturing in June 2021 will allow it to meet its debt obligation over the next 12-18 months, as per S&P. Based on the strong earnings, the adjusted debt-to-EBITDA ratio is not likely to increase despite the higher debt. The ratio is forecasted to be ~4.5x as of March 2021 and ~3.5x by March 2022. According to the rating agency, the upside of the company is constrained due to its debt maturities of ~$2.5bn in fiscal 2023 and ~$3.2bn in fiscal 2024.

Vedanta Resources 8% 2023s and 9.25% 2026s were down 0.17 and 0.21 respectively to trade at 87.38 and 83.04 cents on the dollar.

For the full story, click here

Show Buttons
Hide Buttons