S&P removes Vedanta from negative credit watch
New Delhi: Standard & Poor's has removed Vedanta Resources from negative credit watch saying that the London-listed firm's re-financing risk has reduced after securing funds.
"We affirmed the ratings and removed them from CreditWatch because Vedanta's refinancing risk has reduced after the company secured funds for its June 2013 maturities," S&P credit analyst May Zhong said in a statement yesterday.
Removal from negative credit watch means that the risk of Vedanta's rating downgrade by S&P has reduced in immediate future. The rating agency had put Vedanta on negative credit watch in April citing slow progress made by the company in re-financing the USD 1.35 billion debts, maturing in June.
"Vedanta has recently finalised a refinancing and liquidity policy to manage its debt maturities and liquidity at the holding company. We believe a track record of adherence to the policy will lower risk relating to the company's forthcoming debt maturities," S&P said.
While announcing annual results yesterday, Vedanta said it has refinanced, rolled over and repaid most of the maturing debt (USD 3.6 billion) for the current fiscal. This includes debts maturing in June, for which the company has tied up funds through bank loans and bonds.
Besides, it announced launching of a private bond offering to qualified institutional buyers and said that money from the proceeds will be used for re-financing a portion of the term loan taken to part-finance Cairn India acquisition.
However, S&P said it will continue with the negative outlook for Vedanta due to continued operating challenges and cash flow pressure at the company's iron ore and copper smelting operations.
Negative outlook also reflects S&P's view that the India focused mining giant is "yet to establish a record of delivering on its refinancing and liquidity policy", it said.
The global rating agency also affirmed 'BB' foreign currency long-term corporate credit rating on Vedanta, saying that company's business risk profile is "fair" and financial risk profile is "aggressive" as its business diversity has increased after the acquisition of Cairn India.
At the same time, it cautioned that "risks related to the company's India operations remain high, as reflected in the recent closure of Vedanta's copper smelting business in India."