S&P upgrades Vedanta, rates new notes B+

S&P said it raised the foreign-currency long-term corporate credit rating on Vedanta Resources plc to B+ from B.

The agency also said it raised the long-term issue ratings on the company's issued or guaranteed notes and loans to B+ from B.

S&P also said it assigned a B+ long-term issue rating to the company’s proposed issue of dollar-denominated senior unsecured notes.

The outlook is stable.

The proposed issuance will reduce the company’s refinancing risk, S&P said.

The proceeds will be used to refinance part of its $750 million bond due in 2018 and $1.2 billion bond due in 2019, the agency said.

Any unused proceeds would be primarily used to repay existing debt, S&P added.

The upgrades reflect an expectation that Vedanta’s operating performance will improve over the next 12 to 18 months, owing to higher commodity prices and the company's ramp-up of its aluminum operations, S&P said.

The agency said it also anticipates that Vedanta will continue to have adequate financial flexibility to manage its refinancing over the period.

The company’s EBITDA is expected to consistently improve in the next 12 to 18 months and exceed $3.2 billion in fiscal 2017, S&P said, with it expected at materially higher than $3.5 billion in fiscal 2018. This compares to its EBITDA of $2.4 billion in 2016.

The higher EBITDA is likely to be driven by higher commodity prices, especially zinc, as well as the company's greater scale of operations, the agency said.

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