Digital Assets in Capital Markets

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15 November 2022 (Tuesday) | 9am-5pm

Vedanta Resources Limited’s (VRL) senior unsecured notes have been upgraded to B3 from Caa1 narrowing the difference to one notch between the rating of the notes and that of the issuer. The rating action also applies to the notes issued by VRL’s wholly-owned subsidiary, Vedanta Resources Finance II Plc that are guaranteed by VRL. Meanwhile, the ratings of VRL were affirmed at B2 and the outlook on all ratings has been changed to stable from negative based on VRL’s improving financial metrics. The rating action follows improved liquidity and refinancing risks at VRL after it successfully raised funds through term loans from relationship banks. Concerns around the cash leakage of VRL have been alleviated after it increased its shareholding to 65.2% in June from 55.1% in its subsidiary Vedanta Limited (VDL), following a $840mn debt-financed open offer. VRL’s liquidity has also been boosted by the $1.2bn notes issued in March 2021. The release of dividends by its subsidiaries VDL and Hindustan Zinc Limited will further aid the liquidity. The improved liquidity places the company in a comfortable position to service its debt until March 2022.
The rating agency further expects the company to lower its leverage such that its consolidated debt/EBITDA will be less than 3.0x by March 2022, improving from 4.4x in March this year and 5.2x in March last year. According to the rating agency, VRL’s diversification of operations and improvement in its EBITDA is credit positive. Kaustubh Chaubal, Moody’s Lead Analyst for VRL said, “We consider that subordination risk has reduced for the holdco creditors at VRL. This is due to further simplification of VRL’s organization structure with a higher shareholding in key operating subsidiary Vedanta Limited (VDL), greater credit diversification through an improving business mix across commodities and a steady reduction in the company’s priority claims ratio”.

VRL’s 7.125% 2023s jumped almost 5 points after the upgrade to 99.75. It’s other dollar bonds were trading stable at the time of writing.

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