Moody's Lifts Vedanta’s CFR After Successful Liability Management
Moody's says the bond issuances in quick succession solidify Vedanta's access to capital markets and growing investor confidence in the company
(The Corner Office Journal) -- Moody's Ratings upgraded Vedanta Resources Ltd.’s corporate family rating (CFR) to B2 from B3 and the rating on the senior unsecured bonds to B3 from Caa1.
The upgrade follows the natural resources conglomerate’s successful liability management exercises, with the company raising $800 million in its second bond issuance since September 2024, Moody's said in a statement. It maintained a Stable outlook on the entities.
On 26 November, Vedanta announced that it raised $300 million in 10.25% senior unsecured notes due in June 2028 and $500 million in 11.25% senior unsecured notes due in December 2031, Moody's said.
"The bond issuances in quick succession solidify Vedanta's access to capital markets as well as growing investor confidence in the company," Nidhi Dhruv, a Moody's Ratings vice president and senior credit officer, said.
The senior unsecured bonds, issued by Vedanta and its wholly owned subsidiary Vedanta Resources Finance II Plc, are guaranteed by the company.
Ratings Rationale
The rating agency said the proceeds from the notes will be used for the partial repayment, at par, of the company's remaining $1.2 billion December 2028 notes. After this repayment, only $400 million of the higher interest (13.875%) notes, which were issued following Vedanta's distressed exchange, will remain, it added.
“Given the company's preceding bond transactions, we do not rule out a tap issuance to take out the remaining December 2028 notes,” Moody's said.
The rating agency does not consider the latest issuance as a distressed exchange because:
(1) It does not serve as a means to avoid default, given the bond is due almost three years from now, and
(2) It does not result in an economic loss for investors because the bonds are offered to be repurchased at their full value.
Moody's said Vedanta’s next bond maturity is a $600 million bond due in April 2026 and the company is likely to address this bond maturity in a timely manner.
Debt Level
The rating agency said Vedanta’s recent liabilities management initiatives -- which encompass debt reduction and refinancing using proceeds from newly issued bonds, dividends received from subsidiaries and proceeds from the sale of stakes in subsidiaries -- have led to significant debt reduction and extension of debt maturity profile at the holding company.
Debt at Vedanta’s holding company level reduced to $4.8 billion as of September 2024 from $9.1 billion as of March 2022, it noted.
Moody's said the company's B2 CFR reflects its large-scale and diversified low-cost operations, exposure to a wide range of commodities, strong position in key markets, enabling it to command a pricing premium, and history of relative margin stability through commodity cycles.
The Stable outlook reflects Moody's expectation that Vedanta will address its debt maturities, particularly its next bond maturity in April 2026, in a timely manner, especially given its recent track record of tapping the USD bond markets, according to the statement.
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