S&P Global Ratings has become the latest global ratings agency to downgrade Vedanta Ltd’s UK-based parent Vedanta Resources Ltd (VRL) to “CCC” from “B-” on Friday, September 29. S&P Global has downgraded the rating of the natural resources company on potential bond extensions and has also placed it under ‘credit watch’.
A CCC rating indicates higher vulnerability in meeting its financial commitments. “We have… lowered our long-term issuer credit rating on Vedanta Resources and the issue rating on the company’s outstanding debt to ‘CCC’ from ‘B-‘. We also placed the ratings on credit watch with negative implications,” S&P Global Ratings said in a statement.
Vedanta Resources started discussions with bondholders with respect to maturities of bonds worth about $3 billion. “We believe VRL remains committed to avoid a payment default. We could assess such a liability management transaction,” the statement said.
The S&P rating cut is the second in one week and comes after Moody’s Investors Services downgraded Vedanta Resources’ corporate family rating (CFR) from Caa1 to Caa2 over elevated risks of debt restructuring on Wednesday.
Moody’s had also downgraded to Caa3 from Caa2 its rating on the senior unsecured bonds issued by Vedanta Resources and those issued by Vedanta Resources’ wholly owned subsidiary, Vedanta Resources Finance II Plc, and guaranteed by Vedanta Resources.
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Meanwhile, mining conglomerate Vedanta Ltd on Friday announced plans to demerge five of its key businesses, including aluminium, oil and gas, and steel, into separate listed entities with a view to create shareholder value.
Vedanta Resources owns 68.11 per cent of its Indian subsidiary Vedanta Ltd, which has significant operations in oil and gas, zinc, iron ore, aluminium, power and copper in India.
Meanwhile, Vedanta approved the official demerger of its diversified business into six ‘separate’ listed companies, in a move to unlock value for its shareholders. The six independent listed entities consist of Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta base metals and Vedanta Ltd.
The demerger of the metals-to-mining conglomerate is planned to be a vertical split. Shareholders of Vedanta will get one share each of the five newly listed entities for every one share of the currently listed entity they own.
‘’By demerging our business units, we believe that will unlock value and potential for faster growth in each vertical. While they all come under the larger umbrella of natural resources, each has its own market, demand and supply trends, and potential to deploy technology to raise productivity,” said Anil Agarwal, Chairman, Vedanta.
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Updated: 29 Sep 2023, 09:10 PM IST
