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S&P Upgrades Vedanta Resources To B On Reduced Refinancing Risk

S&P says its Stable outlook reflects that Vedanta Resources will proactively address its $1.15 billion April 2026 debt maturities

Staff Reporter | 20 December 2024 | 07:50 PM

(The Corner Office Journal) -- S&P Global Ratings raised Vedanta Resources Ltd.’s issuer credit rating to B from B- on its diminished refinancing risk.


On 17 December, the Indian natural resources conglomerate announced it obtained the minimum acceptances needed to close its bond consent solicitation, including consent to remove a springing maturity covenant, S&P said in a statement.


“We view it as a virtual certainty Vedanta Resources will succeed with its bond solicitation exercise, after the company received the minimum acceptances needed,” it added.


The rating agency said the passing of the consent solicitation eliminates the residual risk of an accelerated maturity following a $400 million shortfall in Vedanta Resources' most recent bond raising.


The upgrade also reflects a likelihood of improvement in the company's capital structure, it said.


S&P also raised its issue ratings on Vedanta Resources' guaranteed bonds to B- from CCC+. At the same time, it removed the ratings from CreditWatch with positive implications. The rating agency also assigned a B- long-term issue rating to the senior unsecured notes issued by Vedanta Resources Finance II Plc.


Refinancing Risk Diminishes


S&P said it had previously considered the acceleration of maturities in the event of failure to refinance the $600 million bond due in April 2026 by December 2025 as a key risk.


However, this will no longer be the case as new bonds issued in Vedanta Resources' recent $800 million debt raising, together with the expected outcome of the bond solicitation process conducted on the remaining outstanding bonds due 2027 and 2028, will no longer have any springing maturity clause, it added.


“This clause contained a requirement that the issuer refinance the April 2026 bond by December 2025. If it did not, the clause would bring forward payment of its January 2027 and December 2028 bonds to 20 April 2026,” S&P said.


Proposed Revised Covenants


The rating agency said the proposed revised covenants align with those for Vedanta Resources' bond issuances maturing in 2028, 2029, and 2031.


S&P said the key amendments will:


(1) Remove the springing maturity embedded in the outstanding 2028 bonds.

(2) Facilitate an increase in debt headroom at Vedanta Resources' immediate holding company Twin Star Holdings Ltd. to $4 billion.

(3) Realign certain leverage thresholds to allow Vedanta Resources to increase dividends to shareholders.


Following the transaction, debt headroom will increase at the Twin Star level by more than $1 billion and this will give Vedanta Resources flexibility to raise funds to address the $1.15 billion April 2026 maturities, S&P said.


The rating agency said its Stable outlook reflects that Vedanta Resources will likely proactively address its $1.15 billion April 2026 debt maturities. The company's sound underlying operations should also support internal cash generation and refinancing efforts, it added.


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Vedanta Resources S&P Global Ratings