Moody's downgrades Vedanta as bond restructuring gets investor nod

livemint.com:

Vedanta Resources Ltd (VRL), the London-based parent of Vedanta Ltd, as the company goes ahead with its bond restructuring exercise that will delay its immediate debt obligations. The company’s corporate family rating (CFR) was downgraded to Caa3 from Caa2. Moody’s also downgraded the rating of the company’s bonds to Ca from Caa3.

It has maintained a negative outlook on the new ratings. “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," said Moody’s senior vice president Kaustubh Chaubal.

Vedanta Resources had last week received investor consent to restructure about $3.8 billion of its outstanding corporate bonds. The liability management exercise involves making a partial upfront payment and then delaying by 29-52 months the maturity of three of its outstanding bond series—those maturing in January 2024, August 2024 and March 2025. The company also took the consent of holders of its bonds maturing in April 2026, although its repayment timelines remain unchanged.

The restructuring aims to reduce the company’s immediate debt load and give it a longer repayment cycle. This is expected to help it break out of its loop of running against deadline to refinance debt maturities every few months and better meet its obligations through cash flows and the planned asset sales. “…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", said Chaubal, who is also Moody's lead analyst for VRL.