Refinancing debt more challenging for Vedanta Resources in tight market

Rating agency Standard and Poor’s (S&P) has said Vedanta Resources Ltd.’s refinancing of upcoming debt maturities of more than $2 billion over the next 6 months has become more challenging, given tightening conditions in capital markets.

While current capital market conditions have reduced Vedanta Resources’ funding options, its strong underlying operations remain supportive of the company’s ability to meet its immediate debt obligations.

The maturities during this period include its $1 billion bond due in July 2022. It previously expected maturities to be refinanced through a new bond issuance earlier this year.

S&P Global Ratings has a ‘B-‘ rating on Vedanta Resources with a stable outlook.

Dividends from Vedanta Ltd, its subsidiary, will contribute a large part of debt servicing at Vedanta Resources over the next two quarters. About $500 million in fresh funding at Vedanta Resources, combined with internal resources, will make the debt maturities over this period manageable. A fundraising of this magnitude should be achievable given the company’s size, track record, and underlying operating momentum, it said.

In the absence of any fundraising, the company has the ability to step up dividends from Vedanta Ltd. However, the ability to raise new funds in the second half of fiscal 2023 (ending March 31, 2023), including capital market access, will be key to the company sustaining its capital structure. Vedanta Resources’ debt-servicing ability also remains dependent on the strength of commodity prices, it added.

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