Moody’s downgrades Vedanta on weak liquidity, aggressive risk appetite
The agency said in a statement the rating action also considers the impact of the company’s governance practices on its credit profile, which Moody’s regard as credit negative.
New Delhi: Rating agency Moody’s Investors Service today announced it has downgraded the corpoaret family rating of Vedanta Resources Ltd (VRL) and the bonds issued by the company on weak liquidity and aggressive risk appetite.
“The downgrade primarily reflects the holding company VRL’s persistently weak liquidity and high refinancing needs amid growing signs of an aggressive risk appetite, with implications for the company’s financial strategy and risk management, a key component of our governance risk assessment framework,” said Kaustubh Chaubal, a Moody’s Vice President and Senior Credit Officer.
The agency said in a statement the rating action also considers the impact of the company’s governance practices on its credit profile, which Moody’s regard as credit negative.
“Holdco VRL’s liquidity is severely challenged with $2.8 billion of its debt maturing from January 2021 through June 2022, including intercompany debt maturities of $507 million and a $325 million debt maturity at VRL’s sole shareholder Volcan Investments, which Moody’s expects to be serviced out of VRL group cash flows,” the statement said.
What further weakens the holdco’s liquidity is an estimated $470 million of annual interest expense.
Moody’s also said following the upstreaming of the intercompany loan from Cairn India Holdings (CIHL) earlier this fiscal year and VDL’s commitment to investors that no further intercompany loans will be extended without approval from the VDL board, cash movement options from operating subsidiaries to the holdcos may be restricted to dividends and a nominal management or branding fee from its operating subsidiaries.
