Shares of Vedanta Ltd. saw an uptick in trading today amidst reports detailing a significant bond refinancing initiative by its parent company, Vedanta Resources Ltd. (VRL). According to sources cited by Bloomberg, VRL is preparing to refinance $5.2 billion in dollar bonds, a move designed to reduce its overall borrowing expenses.
The refinancing plan involves addressing $3.6 billion of bonds set to mature between 2028 and 2033, alongside $1.6 billion in loans due from 2028 onwards. To facilitate this substantial deal, VRL has reportedly engaged eight major banks, including prominent institutions like JPMorgan Chase & Co, Citigroup Inc, Deutsche Bank, and Barclays Plc.
Credit Ratings Bolster Confidence
The market's positive reaction to the refinancing news is further supported by recent upgrades in VRL's credit ratings. S&P Global, on May 14, upgraded VRL to 'BB' with a stable outlook, attributing the improvement to robust operating performance and enhanced liquidity. S&P highlighted newly secured liquidity lines, strong operating cash flows, and better access to traditional funding sources as key factors strengthening the India-focused commodity company's financial position.
Moody's currently maintains a Ba3 rating on VRL with a positive outlook, while Fitch, as of April 2, assigned a 'BB' rating with a stable outlook. Rating agencies anticipate that VRL's improving cost structure and rising product prices will bolster its earnings and credit metrics.
Financial Outlook and Deleveraging
S&P projects VRL's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to reach approximately $7 billion in both fiscal years 2027 and 2028. This, combined with an expectation of lower dividends, is predicted to significantly increase the company's discretionary cash flow. S&P estimates a reduction in its adjusted debt by US$500 million in fiscal 2027 and US$1 billion in fiscal 2028.
Fitch, on the other hand, expects VRL's capital expenditure to increase to $2.3-$2.6 billion over FY26-FY29, with dividends projected at $250 million from FY27. Fitch noted that VRL's improved credit profile would aid these developments, expecting any additional investing or financing cash outflows to remain within the scope of VRL's broader deleveraging strategy.