Vedanta has to service $3bn debt: S&P

New Delhi: Billionaire Anil Agarwal's Vedanta Resources has debt servicing obligations of about $3 billion, including interest, in the current fiscal, S&P Global Ratings said on estimating that the natural resources company will likely have enough liquidity until December 2023.

In a statement, S&P said Vedanta is close to securing about $1 billion of funding at one of its operating companies. "The India-based natural resource company has debt servicing obligations of about $3 billion, including interest and intercompany loans," it said. "It will have at least another $1 billion obligations that require funding until March 2024."

Vedanta Resources is the parent company of Mumbai- listed Vedanta that declared a fifth interim dividend for 2022-23 last month. "The rating on Vedanta Resources reflects our expectation that it will secure additional funds to support liquidity beyond December 2023," S&P said. "The company is discussing with banks and investors on multiple funding options for at least another $2 billion."

Successful closure of some of these discussions will facilitate the payment of its $1 billion bond due January 2024. "Failure to demonstrate a credible refinancing plan at least six months before the bond maturity could lead to downside rating pressure," it said, adding it did not believe Vedanta Resources' $1 bill that Vedanta Resources will not undertake any transaction that would be regarded as distressed.

Vedanta Resources' fun- ding initiatives are also supported by its capacity to borrow at its subsidiary, Twin Star Holdings. The latter Diments. Rectal owns a 46% stake in the operating company, Vedanta. "Vedanta Resources has been more successful in the past in raising debt at the Twin Star level, given the structural seniority of Twin Star debt to Vedanta Resources debt. We estimate Twin Star has the capacity to raise about $500 million under debt covenants, "the rating agency said.

Vedanta Resources' $1 billion bond maturing in January is also part of the debt at Twin Star. Its $400 million bank loan maturing during the year are also part of the debt at intermediate holding companies, Twin Star, and Vedanta Netherlands Investments.

"While recent fund-raising is credit-positive, Vedanta Resources will become more dependent on external funding. This is due to declining cash at company's operating subsidiaries, which has historically been a source of credit strength," it said.