7th Mar 2016 14:25
LONDON (Alliance News) - Vedanta Resources PLC on Monday saw its corporate family rating and senior unsecured rating downgraded by ratings agency Moody's Investors Service, due to depressed commodity prices and "refinancing risk" faced by the company.
Moody's Investors Service downgraded Vedanta's corporate family rating to B2 from Ba2, indicating a speculative investment.
The ratings agency downgraded also the company's senior unsecured rating to Caa1 from B1, seven steps from investment grade.
The outlook on all ratings is negative, Moody's said.
"The downgrade of Vedanta's ratings is driven by the low commodity price environment that will keep earnings improvement distant, and a slower correction in leverage metrics than initially anticipated," said Kaustubh Chaubal, a Moody's vice president and senior analyst.
"Vedanta's B2 corporate family rating also reflects refinancing risks associated with its USD2.67 billion debt maturities in FY2017," the ratings agency said.
The company's maturities for the full-year to March 2017 include USD1.9 billion due in the April to July 2016 period and the balance USD0.77 billion due in the remainder of the year, Moody's said.
"While the company has so far secured financing for a part of these debt maturities, the absence of a completely executed refinancing plan keeps near term liquidity risk imminent," the ratings agency said.
"Moody's recognizes that on a consolidated basis Vedanta has large cash balances of USD8.9 billion although almost 90% of which is held at its two listed subsidiaries Hindustan Zinc Ltd (unrated) and Cairn India Ltd (unrated)," the agency said.
The ratings agency said that Vedanta's "weak" operating performance "will result in a potential breach of some of its covenants" in March 2016. That would require the company to "request that its lenders provide waivers and relaxations".
"While the company has confirmed that it has received lender approvals for waivers for the next covenant testing date on 31 March 2016 and relaxations for the periods beyond that date, the timely receipt of confirmations from its balance lenders is critical," Moody's said.
Shares in Vedanta were up 0.4% at 370.10 pence on Monday afternoon.
By Samuel Agini; [email protected]; @samuelagini
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