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Rating agency Standard & Poor's (S&P) today that it had placed its 'BB' rating for foreign currency long-term corporate credit to Vedanta Resources CreditWatch with negative implications. It also placed ‘BB’ rating on Vedanta's outstanding issuances on CreditWatch with negative implications.
"We placed the ratings on CreditWatch because Vedanta's refinancing of its large upcoming debt maturities is delayed," said S&P's credit analyst Vishal Kulkarni. “We understand that the company has tied up the majority of the funds for its $809 million debt maturing April 29 and is tying up the rest” he added.
Vedanta is in the process of securing funding for $1,350 million debt due June 6, 2013.
S&P further said that it believes “Vedanta’s ability to tie-up sizable funding to refinance its maturities will continue to be tested in the next 18 months, even if the company can refinance its April and June 2013 maturities.”
It expects Vedanta to eventually garner funding for the debt maturities. “However company’s inability to plan and execute a strategy to diversify funding sources, lengthen maturities, and improve its "less than adequate" liquidity, as defined in our criteria, could pressurize the rating further” S&P warned.
"We expect to resolve the CreditWatch after we review Vedanta's plan to refinance debt maturities due in April and June, and assess the company's financial management strategy," Kulkarni said.
S&P said it could lower the rating in case of the three scenarios. First being unlikely event that Vedanta does not tie up all the funding for its April 2013 maturities by April 12, 2013. Secondly if it fails to finalise funding for its June 2013 maturity at least one month before the maturity date or if rating agency assess Vedanta's refinancing framework and financial management strategy as not being conducive to lengthen the maturities, diversify funding sources, strengthen liquidity at the holding company, and improve access to cash at the subsidiaries.
S&P will affirm the rating if Vedanta adopts strategy to refinance debt and improve liquidity at the holding company and company maintains its "fair" business risk profile and also its operating performance is in line with our expectation, S&P said in a statement.
