Vedanta USD Notes Downgraded at Lucror on Volcan Deal Concerns

(Bloomberg) -- Vedanta Resources USD notes were reduced to ‘not recommended’ from ‘hold’ because a transaction involving the Anil Agarwal’s family-owned Volcan Investments is deemed as credit negative, Lucror Analytics says in a note.

Vedanta, through its Cairn India unit, invested $208m in an economic interest related to an equity stake in Anglo American Plc; it has also committed to make $353m in deferred payments over the next 20 months: Lucror.

NOTE: Volcan is the single largest equity holder in miner Anglo American; Cairn says investment has downside protection.

“We do not consider this investment as being consistent with Cairn India’s business model and view it as being credit negative,” analyst Charles Macgregor says in note. “There is now a heightened risk that Volcan will continue to use Vedanta as a financing vehicle”. The transaction between Volcan and Cairn exacerbates concerns arising from lack of transparency and regulatory oversight following Vedanta Resources’s delisting from London exchange in 2018, Macgregor says.

Vedanta 2022 and 2024 USD notes have each slumped more than 3c on the dollar after the disclosure on Volcan deal. Moody’s lowered Vedanta’s ratings outlook to negative from stable on Feb. 4, citing heightened risk of cash movement outside the group.

2019-02-07 04:09:53.476 GMT

By David Yong