S&P Downgrades Vedanta Resources To SD On Debt Restructuring

S&P Global Ratings downgraded its long-term issuer credit rating on Vedanta Resources Ltd. to SD (Selective Default) from CC.

S&P also lowered the issue ratings on the diversified natural resources conglomerate’s bonds due January 2024, August 2024, and March 2025 to D from CC.

“We view Vedanta Resources' just concluded liability management exercise, which involved three of its U.S. dollar-denominated bonds, as a distressed transaction,” the rating agency said in a statement.

S&P said as part of the exercise, Vedanta Resources addressed the repayment of three bond maturities totaling $3.2 billion using a mix of cash and new bonds. The company exchanged about half of the January 2024 bond with new bonds maturing in January 2027, with the rest paid in cash, it added.

In addition, the company exchanged 94% and 84%, respectively, of the August 2024 and March 2025 bonds for new amortizing bonds that will mature in December 2028, with the rest prepaid in cash, S&P said.

DISTRESSED TRANSACTION

The rating agency said it considers the transaction as distressed, and not simply opportunistic, based on the following:

• The likelihood of a conventional default in the absence of the transaction was high. This is because of the company's large upcoming debt maturities and reduced access to both internal cash flow and external financing.

• S&P does not consider the new terms of the proposed transaction as constituting adequate compensation to offset the maturity extension and some cashflow subordination to a new financing facility.

REFINANCING RISKS

The rating agency said the refinancing risks remain despite a stronger capital structure post transaction. Vedanta Resources has debt repayments of about $900 million each in the fiscal years ending 31 March 2025 and 2026, it added.

“While this is much lower than the company's refinancing needs of about $3 billion annually over the past two to three years, we believe the maturities are still meaningful, given the company's reduced financing access,” S&P said.

These debt maturities will need to be refinanced or met through the creation of additional dividend capacity at its subsidiaries, particularly at Hindustan Zinc Ltd., it added.

S&P said it believes further deleveraging at Vedanta Resources, possibly driven by asset sales at subsidiary Vedanta Ltd., will be necessary to sustainably improve access to external funding.

In the meanwhile, the rating agency said it expects to raise its ratings on Vedanta Resources to the mid-to-high CCC category in the coming days.

S&P said the issue rating on the conglomerate’s April 2026 bond, which was not part of the liability management transaction, remains 'CCC' and on CreditWatch with developing implications.

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