Vedanta shares in focus as Moody's downgrades VRL ratings citing material liquidity issues

Shares of Vedanta Ltd will be in focus on Wednesday morning after the credit rating agency Moody's Investors Service downgraded the corporate family rating (CFR) and senior unsecured bonds of parent Vedanta Resources Ltd, citing worries over the firm's ability to address its cash requirements.  This was the second such downgrade by Moody's since September 2023.

Moody's said that Vedanta Resources may face material liquidity issues over the upcoming 24 months and warned that the "default risk" remains high, noting that the group has an outstanding debt of $6.4 billion, which including a $4.5 billion payment due by FY25.

Vedanta shares are up 5 per cent in the last one month but are down 18 per cent in the last one year. Moody’s called parent VRL's recent debt restructuring as "default avoidance" while suggesting that VRL's  creditors incurred an economic loss with respect to the original promise.

Moody's now downgraded Vedanta Resources' CFR to Caa3 from Caa2 and its senior unsecured bonds to Ca from Caa3. It retained its negative rating outlook. In September last year too, Moody's had cut its rating on Vedanta Resources’ (VRL) senior unsecured bonds, citing elevated risk of debt restructuring over the next few months.

That time it had cut corporate family rating (CFR) of Vedanta Resources to Caa3 from Caa2 and senior unsecured bonds' rating to Caa3 from Caa2.

Vedanta Resources received bondholders support to restructure some of its near-term debt, but Moody's consider the transaction to be a distressed exchange under, which underpins its downgrade of Vedanta Resources' ratings.

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