Following Vedanta creditors' substantial approval of its debt restructuring plans, Moody's Investors Service has downgraded the corporate family rating of Vedanta Resources Limited (VRL) from Caa2 to Caa3. Additionally, the rating agency downgraded VRL's senior unsecured bonds from Caa3 to Ca. Despite the creditors' endorsement, Moody's has maintained a negative rating outlook for the company.
The overwhelming support from bondholders, with a 97% vote share, was granted to Vedanta Resources' proposal for restructuring debts tied to four series of bonds. These series encompass bonds maturing in 2024, 2025, and 2026. While this vote demonstrated confidence from bondholders, Moody's assessment of VRL's ratings underscores concerns about the company's unsustainable capital structure marked by elevated financial leverage at the holding company and persistent weak liquidity. These challenges persist against a backdrop of sustained significant negative free cash flow.
Moody's analysis indicates that Vedanta Resources Limited is expected to grapple with substantial liquidity issues over the next 24 months, heightening the risk of default. Despite the positive vote from bondholders, Moody's downgrades underscore the ongoing challenges faced by Vedanta in maintaining a financially sustainable position. The company's struggle with high financial leverage and precarious liquidity is expected to persist, contributing to Moody's cautionary outlook on Vedanta's creditworthiness in the coming months.
Moody's downgrades reflect the rating agency's apprehension about Vedanta's ability to maintain a financially sustainable position, emphasizing the challenges posed by high financial leverage and ongoing liquidity constraints. The downgrade aligns with Moody's cautious stance on Vedanta's creditworthiness in the coming months, underscoring the uphill battle for the company despite creditor support.
