Unsuccessful delisting: Moody’s puts Vedanta under review for downgrade

Moody’s Investors Service on Tuesday placed Vedanta Resources’ rating under review for downgrade following its failed attempt to delist the Indian listed subsidiary. Moody’s placed the London-based firm’s B1 corporate family rating (CFR) under review for downgrade. The same action was also initiated for the B3 ratings on the senior unsecured bonds issued by Vedanta and those by its wholly-owned subsidiary Vedanta Resources Finance II, and guaranteed by Vedanta, affecting $4.2 billion in outstanding debt. “The ratings outlook was changed to ratings under review from negative,” Moody’s said in a statement. The review, it said, follows an increase in refinancing risk and significant funding needs at the holding company level following Vedanta Resources’ failure to acquire the balance shareholding in key subsidiary Vedanta Ltd that would have improved access to group cash.

On October 10, the company had announced that its voluntary delisting offer – to acquire the balance shareholding in Mumbai-listed Vedanta Ltd and then delisting it from the stock exchange – had failed at the reverse book building stage. The total number of shares tendered by Vedanta Ltd’s public shareholders fell 7% short of the mandatory minimum 90% for successful delisting. “Moody’s had viewed the proposed delisting as a credit positive and a step forward in simplifying the group’s complex shareholding structure, that would have allowed for better access to consolidated cash while avoiding leakage during dividend distributions. “With the failed delisting, the holding company’s liquidity risk has increased with around $2.9 billion in debt maturities between April 2020 and March 2022 (including a $120-million revolving credit facility repayable in February 2021 and $425 million – the remainder of Volcan’s debt to privatise Vedanta Resources) and annual interest payments of $470 million each year,” the statement said.

Moody’s said its review will focus on the holding company’s ability to refinance its upcoming debt maturities in the fiscal ending March (fiscal 2021) and fiscal 2022. It expects to conclude the review within 90 days.