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Bond Market News

Vedanta Outlook Revised Down to Negative by Moody’s

Moody’s has revised its outlook on Vedanta Resources Ltd (VRL) to negative from stable whilst affirming its B2 rating and B3 senior unsecured rating. Kaustubh Chaubal, Moody’s VP and Sr. Credit Officer said, “The change in outlook to negative reflects holding company VRL’s large near-term refinancing requirements amid tightening liquidity in the capital markets”. Moody’s notes that the holding company VRL is about to enter its peak years of long-term debt maturities – 60% of its total $9.4bn debt falls due in fiscal years ending March 2023 and 2024. $4.2bn or 45% of total debt will mature by June 2023 which includes its dollar bond maturities: $1bn due July 2022, $400mn due April 2023 and another $500mn due May 2023. Moody’s highlights liquidity risks exacerbating with an annual interest bill of $800mn from $500mn in prior years. “We estimate the holdco’s current cash sources — management fee and dividends from operating subsidiaries — will fall short of its cash needs over the 18 months until June 2023… the absence of an executed refinancing plan keeps liquidity risk elevated”, the rating agency notes. Higher commodity prices currently are a strong credit positive for the company. Also, VRL’s increased stake in Indian subsidiary Vedanta Ltd.  can help tap the liquidity at the latter and its 64.9%-owned subsidiary Hindustan Zinc Ltd. with lower cash leakage.

Vedanta’s dollar bonds were steady with its 13.875% 2024s at 104.56, yielding 11.15%.

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