Moody's Investors Services has downgraded Vedanta Resources' rating to 'Caa2' from 'Caa1'. This was done after taking Vedanta's upcoming debt repayments into account.
Moody's also maintained a negative outlook of the company, and warned of a further downgrade if Vedanta fails to arrange for funds and repay its debts.
"The downgrade reflects elevated risk of debt restructuring over the next few months because Vedanta Resources Ltd (VRL) has not made any meaningful progress on refinancing its upcoming debt maturities, in particular the $1 billion bonds maturing each in January 2024 and August 2024," Kaustubh Chaubal, the lead Moody's analyst on Vedanta Resources Ltd. is
Furthermore, Vedanta Ltd.'s shares fell to their lowest level in 14 months, after the lowering of its parent VRL's rating. The company's shares dipped over 6 per cent to hit a 52-week low of Rs 210 apiece.
VRL is a diversified mining corporation that has interests in oil and gas, zinc, lead, silver, aluminum, iron ore, steel and power.
Moody's has also downgraded its rating to Caa3 from Caa2 for VRL's senior unsecured bonds as well as bonds issued by its wholly-owned subsidiary, Vedanta Resources Finance II Plc.
Along with other loan repayments, Vedanta Resources, the parent company of Indian-listed Vedanta Ltd., has a number of debt commitments. These include a $1 billion bond due in January 2024, $950 million in bonds due in August 2024, and $1.2 billion in bonds due in March 2025.
According to Moody's, "VRL's weak liquidity due to significant refinancing needs and interest expense amid tightening financing conditions in global capital markets" is a constraint on the company's credit quality.
Due to the fact that its whole shareholding in Vedanta Ltd. has already been committed, the company's headroom to raise capital is similarly limited. The entire Hindustan Zinc interest held by Vedanta Ltd. is also promised.