S&P Global Ratings has assigned B-negative long-term issue rating to Vedanta Resources Ltd’s proposed guaranteed senior unsecured notes.
Vedanta Resources Finance II Plc will issue the notes and they will be guaranteed by Vedanta Resources and two of its subsidiaries — Twin Star Holdings and Welter Trading. These two subsidiaries together own 38.1 percent in Vedanta Ltd which is Vedanta Resources’ subsidiary.
The issuer will lend the proceeds to Twin Star for the acquisition of equity shares of Vedanta Ltd in accordance with existing laws. Any remaining proceeds will be used to service existing debt.
“We rate the proposed notes the same as the issuer credit rating on Vedanta Resources,” said S&P.
“We do not notch the issue rating for subordination risk because a majority of the company’s assets are in India, a jurisdiction where we believe the priority of claims in a bankruptcy scenario is highly uncertain.”
S&P said the stable outlook on Vedanta Resources reflects reduced refinancing risk over the next 12 to 18 months. The company’s funding access is likely to improve following the open offer.
Vedanta Resources has substantially refinanced its 670 million dollars bond due June 2021. While the company still has sizable debt maturities over the next year, S&P said it is better placed to manage them through access to subsidiary cash as well as refinancing.
Strength in the underlying operational earnings is also key to the outlook.