Moody’s Investors Service on Monday downgraded the corporate family rating (CFR) of Vedanta Resources (VRL) to ‘B3’ from ‘B2’, citing the holding company’s persistently weak liquidity profile.
It also downgraded senior unsecured bonds issued by VRL, Vedanta Resources Finance II Plc and guaranteed by VRL to ‘Caa1’ from ‘B3’. The outlook on the ratings remains negative, it said.
“Today’s rating action reflects VRL’s rising refinancing pressure, given that the company is yet to obtain funding for its large maturities due in April 2023 and Vedanta Resources Finance II Plc’s due in May 2023, which is taking longer than Moody’s earlier expectations of completion by October 2022. The proximity of the large maturities’ due dates without a refinancing completed well in advance indicates VRL’s aggressive liability management,” Moody’s senior vice-president Kaustubh Chaubal said.
“The negative outlook reflects holding company VRL’s persistently weak liquidity profile and our concerns over the elevated refinancing risk arising from its looming debt maturities,” he added.
VRL’s persistently weak liquidity and high-refinancing needs with large, looming debt maturities are a pertinent credit risk, especially amid rising inflation and higher interest rates weighing on global economic growth.
Moody’s had earlier expected VRL to refinance Vedanta Resources Finance II Plc’s April 2023 and VRL’s May 2023 dollar bond maturities by October this year. In addition to these, $900-million bond maturities in the first quarter of the year ending March 31, 2024, VRL has $830 million loan repayments between October 2022 and March 2023.
While cash dividends can somewhat ease the holdco’s woes, large dividend payments will erode its operating subsidiaries’ liquidity.