Moody's Ratings upgraded Vedanta Resources Ltd.’s corporate family rating to Caa1 from Caa3 amid the conglomerate’s reduced refinancing risk and changed the outlook to stable from negative.
The upgrade to Caa1 is primarily driven by the diversified natural resources conglomerate’s reduced refinancing risk following its successful issuance of $900 million in 10.875% notes due in September 2029, Moody's said in a statement.
The proceeds from this issuance have been earmarked for the repurchase of two existing bonds, Moody's said. Specifically, Vedanta Resources plans to fully redeem its 2027 notes, which have an outstanding value of $470 million, and use any remaining funds to partially repurchase its 2028 notes, currently outstanding at $1.008 billion, it added.
The rating agency said bondholders who tender their bonds before the early deadline of 16 September will receive full repayment, while those tendering after this date will receive 96% of the bond's value.
Moody's said it does not consider this as a distressed exchange because a) it does not serve as a means to avoid default, given that both bonds mature in January 2027 or later, and b) it does not result in an economic loss for investors because the bonds are offered to be repurchased at their full value.
The rating agency said even if some bondholders do not tender their bonds before the early deadline and these are repurchased at below par, the transaction does not qualify as distressed since it is not a default avoidance.
Moody's also upgraded to Caa2 from Ca its rating on the senior unsecured bonds issued by Vedanta Resources and by its wholly owned subsidiary Vedanta Resources Finance II Plc and guaranteed by Vedanta Resources.
The rating agency said the holding company Vedanta Resources has successfully reduced its gross debt to $5.7 billion as of March 2024 from $9.1 billion at March 2022. Such repayments have been funded via dividends received from its 56.4%-owned Indian subsidiary Vedanta Ltd. in addition to stake sales in the unit.
Moody's also said in recent months, Vedanta Ltd. has enhanced its liquidity to support shareholder distributions through a $1 billion equity issuance via a qualified institutional placement and the sale of around 3% stake in its subsidiary Hindustan Zinc Ltd. The company’s ownership in Hindustan Zinc now stands at around 62% following the stake sale.
The stable rating outlook reflect Moody's view that Vedanta Resources’ credit metrics will remain comfortable for its Caa1 rating, according to the statement.
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