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Moody's places Vedanta Resources rating under review for downgrade

Moody's said its review for downgrade will primarily focus on five factors.

, ET Bureau|
Last Updated: Mar 24, 2020, 03.21 PM IST
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"The ratings outlook was changed to ratings under review from stable," a Moody's statement said.
Kolkata: Moody's Investors Service has on Tuesday placed Vedanta Resources Limited's B1 corporate family rating (CFR) under review for downgrade.

Moody's said it has also placed under review for downgrade the B3 ratings on the senior unsecured bonds issued by
Vedanta and those issued by its wholly-owned subsidiary, Vedanta Resources Finance II Plc, and guaranteed by Vedanta.

"The ratings outlook was changed to ratings under review from stable," a Moody's statement said.

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil
prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions
and markets. The combined credit effects of these developments are unprecedented, the statement added. "Exploration and production (E&P) and metals and mining are among the sectors most significantly affected by the shock given their sensitivity to consumer demand and sentiment.

More specifically, the weaknesses in Vedanta's credit profile, including its exposure to various commodities, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions, and Vedanta remains vulnerable to the outbreak continuing to spread," the global ratings agency said.

"The review for downgrade reflects our expectation that low oil and base metal prices will significantly strain Vedanta's financial metrics, at least through the fiscal year ending March 2021," Kaustubh Chaubal, a Moody's vice president said.

"Moreover, the review highlights the heightened refinancing risk surrounding the holding company's around $1.9 billion of debt securities, which will mature through September 2021," Chaubal, who is also Moody's
lead analyst on Vedanta added.

Moody's said its review for downgrade will primarily focus on five factors.

The outbreak's impact on Vedanta's operations in light of increasing restrictions on people's movement and the potential for a shutdown of operations to ensure employee safety.

The impact of the outbreak on oil and base metal prices. Vedanta's asset base, cost structure, likely cash burn rate and liquidity, as well as management's strategy for coping with prolonged, low and volatile commodity prices.
The impact of potential countermeasures such as capex deferment and reduced dividends.

It will also depend on Vedanta's resilience including, in particular, its ability to refinance its $1.9 billion of debt securities via the capital markets and bank debt.
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