Bulletin: Vedanta Resources PLC Rating Not Immediately Affected By Revised Merger Terms

SINGAPORE (S&P Global Ratings) July 25, 2016--S&P Global Ratings said today that its rating on Vedanta Resources PLC (foreign currency B/Stable/--) is not immediately affected by the revised terms of the merger of its subsidiary Vedanta Ltd. with Cairn India Ltd. In our view, the proposed merger can improve the cash flow fungibility within Vedanta Ltd. but not between Vedanta Ltd. and Vedanta Resources. The merger could marginally weaken Vedanta Resources' financial metrics, but the company's better-than-expected operating performance could more than offset the impact, in our view. Vedanta Resources will continue to be exposed to cash flow leakage. This is because minority shareholders will have a 49.9% stake in Vedanta Ltd. after the merger. Also, a dividend distribution could

...SINGAPORE (S&P Global Ratings) July 25, 2016--S&P Global Ratings said today that its rating on Vedanta Resources PLC (foreign currency B/Stable/--) is not immediately affected by the revised terms of the merger of its subsidiary Vedanta Ltd. with Cairn India Ltd. In our view, the proposed merger can improve the cash flow fungibility within Vedanta Ltd. but not between Vedanta Ltd. and Vedanta Resources. The merger could marginally weaken Vedanta Resources' financial metrics, but the company's better-than-expected operating performance could more than offset the impact, in our view. Vedanta Resources will continue to be exposed to cash flow leakage. This is because minority shareholders will have a 49.9% stake in Vedanta Ltd. after the merger. Also, a dividend distribution could result in additional 20% leakage. The risk from leakage becomes more acute with only a small portion of the intercompany loan between Vedanta Ltd. and Vedanta Resources remaining after a recent repayment of bonds,...

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