[ad_1]
Global rating agency Moody’s has changed the outlook from “stable” to “negative” on Vedanta Resources Ltd (VRL) reflecting large near-term refinancing requirements amid tightening liquidity in the capital markets.
It, however, affirmed VRL’s “B2” corporate family rating (CFR) and the B3 rating on the senior unsecured notes issued by VRL and those by Vedanta Resources Finance II Plc.
Kaustubh Chaubal, Vice President and Senior Credit Officer, Moody’s said the continued delay in refinancing its upcoming debt maturities with long-term funding raises concerns over the company’s liquidity management. The supportive commodity prices have improved the company’s key financial metrics.
Moody’s considers the holdco’s persistently weak liquidity and high refinancing needs as signs of an aggressive risk appetite, with implications for the company’s financial strategy and risk management.
The rating action considers the impact of VRL’s aggressive liquidity management and refinancing practices on its credit profile, which Moody’s regards as credit negative.
The affirmation of the CFR reflects the view that VRL’s operations are solidly positioned with favorable underlying demand and commodity prices that support continued positive free cash flow generation.
VRL is about to enter its peak years of long-term debt maturities in fiscal years ending March 2023 and March 2024, when about 60 per cent of its total $9.4 billion debt falls due. Moreover, $4.2 billion, or 45 per cent of the total $9.4 billion debt, will mature by June 2023. These debt maturities include senior unsecured notes of $ one billion in July 2022, $400 million in April 2023 and another $500 million in May 2023.
Further exacerbating liquidity risk at the holdco is an annual interest bill that has climbed to around $800 million, from $500 million in previous years.
The holding company’s current cash sources–management fee and dividends from operating subsidiaries — will fall short of its cash needs over the 18 months until June 2023.
The company is obtaining financing for a part of its upcoming debt maturities. But the absence of an executed refinancing plan keeps liquidity risk elevated, especially amid tight liquidity in capital markets and widening yields on its existing USD bonds, it added.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
[ad_2]
Source link
