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Rating agency S&P has downgraded the long-term credit rating of Vedanta Resources to SD, or selective default on Friday and termed the company’s recent bond restructuring exercise as a distressed transaction.
This is the second downgrade for the company this week after Moody’s downgraded its corporate family rating to Caa3 from Caa2.
“We view Vedanta Resources’ just concluded liability management exercise, which involved three of its US dollar-denominated bonds, as a distressed transaction,” S&P analysts noted.
Debt restructuring process
Vedanta Resources, the London-based parent of India’s Vedanta, on Friday said that it has transferred a consent fee due to its bondholders, kickstarting the restructuring process. The restructuring will see the redemption date of three of Vedanta’s outstanding bond series delayed by 29-52 months in exchange of a part payment upfront, higher interest rates on two bond series, and a consent fee equal to 2 per cent of the principal.
The company said that it will make the part payments before the February 7 deadline.
Kaustubh Chaubal, Senior Vice-President, Moody’s, on Tuesday 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.”
Last month, S&P had downgraded Vedanta Resources to CCC from CC as the company started seeking investor consent for the bond restructuring exercise. It had warned back then that once the plan is implemented, the company’s long-term credit rating could fall to SD.
The rating agency noted that a refinancing risk remains for Vedanta Resources despite a stronger capital structure post the transaction. Vedanta Resources has debt repayments of about $900 million each in FY25 and FY26. While this is lower than the company’s refinancing needs of about $3 billion annually over the past two to three years, S&P analysts noted that the maturities were still meaningful given the company’s reduced access to financing.
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