By Alex MacDonald
LONDON--Standard & Poor's became the second ratings agency
in less than a month to put the credit ratings of India-focused
Vedanta Resources PLC (VED.LN) under review for a possible
downgrade further into junk territory due to concerns about its
ability to finalize the funding for upcoming debt maturities.
"Vedanta has made slower progress than we expected in finalizing
funding for its upcoming debt maturities," S&P said.
"We expect to resolve the CreditWatch after we review Vedanta's
plan to refinance debt maturities due in April and June, 2013, and
assess the company's financial management strategy," said S&P
credit analyst Vishal Kulkarni.
The U.K.-listed natural resources company has $809 million of
debt maturing on April 29 and $1.35 billion due on June 6.
Last month, Moody's Investors Service also put the company's
credit rating under review for similar reasons, including concerns
about its short-term debt maturity profile, lower earnings outlook
and low dividend payouts from its subsidiaries.
Moody's has a Ba1 corporate family rating and a Ba3 senior
unsecured rating on Vedanta, while S&P has a 'BB' foreign
currency long-term rating on the company. These ratings are already
below investment grade.
Vedanta wasn't immediately available for comment.
"We believe Vedanta's ability to tie-up sizable funding to
refinance its maturities will continue to be tested in the next 18
months, even if the company can refinance its April and June 2013
maturities," said S&P.
The agency added that Vedanta's inability to execute a strategy
to diversify funding sources, lengthen maturities, and improve its
"less than adequate" liquidity could pressurize the rating
further.
S&P expects Vedanta to struggle to access cash and cashflows
from its subsidiaries because of sizeable cash leakages in the form
of dividends to minority shareholders and taxes that provide
disincentives to Indian companies to declare dividends to the
holding company.
"The holding company does not maintain any credit lines and
therefore needs to rely on external sources of funding for
refinancing," S&P noted.
Vedanta's subsidiary Sterlite Industries (India) Ltd.
(500900.BY) said Wednesday that it has received a Goa court
approval to merge with Vedanta's other subsidiaries to create a
more streamlined corporate structure. Sterlite is now waiting for
final approval from the high court of Madras, where hearings have
been completed and the ruling is pending, to close the corporate
restructuring deal.
Vedanta also said Wednesday that India's Supreme Court has
reversed an earlier court ruling that forced the closure of
Sterlite's Tuticorin copper smelter, which has a smelting
production capacity of 400,000 metric tons of copper annually and
supplies about half of India's copper needs.
Vedanta shares closed Wednesday up 1.7% at 1009 pence, resulting
in a market capitalization of 2.64 billion pounds ($4 billion).
Write to Alex MacDonald at alex.macdonald@dowjones.com
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