Global rating agency Standard and Poor’s (S&P) on Wednesday said that Vedanta Resources Ltd can increase its funding options to address its refinancing needs if it secures consent to raise the cap on total debt at subsidiary guarantor Twin Star Holdings Ltd.
The exercise will not have any immediate effect on the rating of Vedanta Resources (B-/Stable/–).
Investors have been more receptive to debt issued via Twin Star than that from Vedanta Resources, a global miner. Fundraising via Twin Star would help address refinancing, especially a $1 billion bond due July 2022. It could also help Twin Star increase its stake in its operating subsidiary, Vedanta Ltd, S&P said in a statement.
Both these outcomes would improve the credit profile of Vedanta Resources by improving liquidity, the key rating constraint. “We expect the additional debt at Twin Star to be largely neutral to Vedanta Resources’ leverage, as part of the additional debt will likely be used for refinancing,” S&P added.
To the extent that the additional debt is used to increase Twin Star’s stake in Vedanta Ltd, the increased cash flows from the subsidiary to Vedanta Resources would mitigate any effect on leverage.
Vedanta Resources has launched a consent solicitation to request holders of two tranches of its bonds guaranteed by Twin Star to increase its debt cap to $5 billion from an existing $3.6 billion. This would follow completion of the open offer, in April 2021. Twin Star is Vedanta Resources’ wholly-owned subsidiary, which in turn owns about 44.6 per cent of Vedanta Ltd.
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