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Moody's: Vedanta Resources' tender offer unlikely to be distressed exchange

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Staff writer ▼ | January 14, 2016
Vedanta Resources
Ratings   The final treatment of the Vedanta offer will become known on January 18

Moody's Investors Service said that Vedanta Resources' tender offer on its convertible bond maturing in July 2016 is unlikely to be treated as a distressed exchange.

However, Moody's final treatment of the offer will depend on the settlement price, which will become known when the offer closes on 18, January.

Vedanta Resources plc's Ba2 corporate family rating and B1 senior unsecured rating, as well as the negative ratings outlook, are unaffected by the offer.

On January 11, 2016, Vedanta Resources announced an offer to repurchase for cash up to $500 million of its outstanding $1.134 billion convertible bonds due July 2016.

The offer impacts only around 3% of Vedanta Resources' total outstanding debt.

The offer will be conducted as a modified Dutch auction and it allows the company to increase or decrease the offer amount.

The tender offer will be funded from the term loan raised at Vedanta Resources PLC and the funds received through the part repayment of an intercompany loan by Vedanta Ltd.

"Moody's is likely to view the contemplated deal as an opportunistic buyback since the issue of default avoidance is currently unclear, pending the emergence of clarity on the purchase price" says Kaustubh Chaubal, a Moody's Vice President and Senior Analyst.

"However, a distressed exchange could materialize if the note-holder losses exceed current expectations, estimated based on current market prices," adds Chaubal, who is also Moody's lead analyst for Vedanta Resources.

"While Vedanta Resources has not stated any intention on further buybacks, additional discounted note repurchases may be treated as a distressed exchange when viewed in combination with the current proposed transaction," says Chaubal.


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