After unfavourable ratings Vedanta Resources terminates Moody's services

Vedanta Resources, the holding company of India’s Vedanta Limited, on November 7 terminated the Moody’s rating services after the latter downgraded the company’s ratings amid debt concerns, the Economic Times reported.

“Vedanta Resources Limited hereby announces that it has today given notice to Moody’s Investor Services to discontinue its rating engagement and to withdraw all the outstanding ratings.” Vedanta said in a statement today.

On October 31, Moody’s had downgraded the corporate family rating of Vedanta Resources to B3 from B2 and senior unsecured bonds rating to Caa1 from B3. While downgrading, the agency voiced concerns that Vedanta is yet to find a source of funding for its $900 million bond maturities due in April and May 2023. The Moody's expectations of securing the funding was by the end of October.

Moody's said that it continues to view the company's unsustainable capital structure, weak liquidity and poor liability management as signs of an aggressive risk appetite. This has implications for the company's financial strategy and risk management, a key component of the rating agency's corporate governance risk assessment framework. Read here.
 

"Rating action reflects rising refinancing pressure as VRL was yet to obtain funding for its large maturities due in April 2023 and Vedanta Resources Finance II Plc's due in May 2023," said Kaustubh Chaubal, a Moody's Senior Vice President.

"The proximity of the large maturities' due dates without a refinancing completed well in advance indicates VRL's aggressive liability management," he added.

Following which on November 1 the company had disputed the Moody’s rating actions through a strongly worded statement.

Vedanta Resources called Moody’s concerns "far-fetched and unreasonable,” in its Tuesday statement.

“Vedanta is in a very comfortable position to address all its debt maturities with a strong balance sheet, robust liquidity at its operating subsidiaries and strong track record of raising funds through relationship banks,” the company said.

“Moody’s has ignored Vedanta’s repeated explanations and liability management plans and made its rating action based on unreasonable and subjective assessment,” the statement further read.

The Moody’s had explained that in addition to the $900 million bond maturities in the first quarter of FY24, VRL has $830 million of loan repayments between October 2022 and March 2023. The company will have to service a total of $3.8 billion of external debt maturities, $450 million of intercompany loan and an annual interest bill of around $600 million over the 18-month period from October 2022 through March 2024.

“Given VRL is purely a holding company without any operations, it will stay reliant on dividends from operating subsidiaries and on Indian and multinational banks for funding, because Moody's expects cross-border capital markets to remain very challenging,” the Moody's said.