Moody’s downgrades Vedanta corporate family rating

Moody’s Investors Service on Monday downgraded the corporate family rating (CFR) of Vedanta Resources (VRL) to ‘B3’ from ‘B2’, citing the holding company’s persistently weak liquidity profile.

It also downgraded senior unsecured bonds issued by VRL, Vedanta Resources Finance II Plc and guaranteed by VRL to ‘Caa1’ from ‘B3’. The outlook on the ratings remains negative, it said.

“The negative outlook reflects holding company VRL’s persistently weak liquidity profile and our concerns over the elevated refinancing risk arising from its looming debt maturities,” he added.

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VRL’s persistently weak liquidity and high-refinancing needs with large, looming debt maturities are a pertinent credit risk, especially amid rising inflation and higher interest rates weighing on global economic growth.

Moody’s had earlier expected VRL to refinance Vedanta Resources Finance II Plc’s April 2023 and VRL’s May 2023 dollar bond maturities by October this year. In addition to these, $900-million bond maturities in the first quarter of the year ending March 31, 2024, VRL has $830 million loan repayments between October 2022 and March 2023.

While cash dividends can somewhat ease the holdco’s woes, large dividend payments will erode its operating subsidiaries’ liquidity.