Ratings agency Moody's Investors Service on Tuesday said it has downgraded its rating on the senior unsecured bonds issued by Vedanta Resources to Ca from Caa3.
The rating for the Corporate Family Rating (CFR) of Vedanta Resources was also downgraded to Caa3 from Caa2, Moody's said.
"We view the debt restructuring as default avoidance and assess that the creditors have incurred an economic loss with respect to the original promise. We consider the transaction to be a distressed exchange under our criteria, which underpins our downgrade of VRL's ratings," Moody's Senior Vice President Kaustubh Chaubal said.
Last week, Vedanta Resources, the UK-headquartered parent company of Vedanta group, received bondholders' approval to restructure four series of bonds.
"Proforma the debt restructuring, holdco VRL's near-term liquidity will improve only slightly and its refinancing wall will start building up as it approaches its next bond maturity in April 2026.
"Furthermore, a springing covenant requiring holdco VRL to refinance its April 2026 bond maturity by December 2025, failing which all amended bonds will mature in April 2026, will keep refinancing risk elevated and the likelihood of further distressed exchanges high," Chaubal said.
The company's ratings reflect its unsustainable capital structure characterised by high financial leverage at the holding company and its perennially weak liquidity amid a period of continued large negative free cash flow, Moody's said.
The ratings agency said that it believes the company will still face material liquidity issues during the next 24 months and that its default risk remains high.