Standard & Poor's (S&P) Ratings Services today assigned its 'BB' rating to the proposed $1.25 billion convertible bond issue of Vedanta Resources Jersey , a wholly owned subsidiary of London-based metals and mining company Vedanta Resources PLC (foreign currency BB/Watch Neg/--). The bonds are guaranteed by Vedanta Resources PLC (Vedanta), and represent a senior unsecured obligation of the guarantor.
The CreditWatch listing on Vedanta reflects S&P's view that its sizeable capital expenditure program and appetite for debt-funded acquisitions in a severe industry downturn increases its risk.
The rating on Vedanta, the guarantor, reflects its exposure to cyclical and volatile base metal prices, its continued aggressive growth plans, its weak, although improving, cost position and its complex holding company corporate structure. These weaknesses are partly offset by Vedanta's low-cost zinc and copper operations in India, strong and increasing reserve base of zinc and iron ore, sufficient liquidity, access to capital markets, and improving business diversification.
Vedanta's assets are located in India, Australia, and Zambia. Due to the nature of the metals and mining industry, Vedanta is exposed to fluctuating base metal prices.
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