04 September 2018 09:31:57 IST

London-listed Vedanta Resources to go private on October 1

“The delisting will not immediately affect Vedanta’s credit profile or rating”

Mining major Vedanta Resources’ Chairman Anil Agarwal will take the London-listed company private on October 1, Agarwal’s family trust announced on Monday.

The wholly family trust-owned Volcan Investments Ltd, which held about two-thirds of Vedanta Resources prior to announcing an around $1 billion buyout offer in July, said it now held or had received acceptances of its offer on 92.31 per cent of Vedanta Resources share capital and the cash offer had now become unconditional in all respects.

It said the offer remains open for acceptances until further notice, while holders of 26 per cent of shares had agreed to sell.

Agarwal has said he wanted to buy out the London listing, which is much smaller in comparison with Vedanta’s Indian operations, in order to simplify the company structure.

Vedanta’s international operations are copper mines in Zambia and Vedanta Zinc, with operations in South Africa and Namibia.

Meanwhile, US rating agency Moody’s Investor Service has said the proposed delisting of the Vedanta Resources from the London Stock Exchange will have no immediate impact on its credit profile, although cash extraction risks remain from the complete takeover of Vedanta by Volcan Investments.

“The delisting will not immediately affect Vedanta’s credit profile or rating. This is based on our expectation that Volcan will not extract incremental cash from Vedanta to provide additional liquidity for itself.

“However, if Volcan requires Vedanta to pay higher dividends to service its cash needs, it will tighten Vedanta’s cash flow, adding pressure to the Ba3 corporate family rating,” Moody’s said in a statement.

“Vedanta’s rating is based on the consolidated credit profile of Vedanta and its subsidiaries and does not take into account Volcan’s indebtedness. Any change in Vedanta’s policies, such that Vedanta is used as a financing vehicle for Volcan, will be viewed negatively and will also weigh on Vedanta’s credit profile and rating,” it added.

The American rating agency said Volcan is a private company with limited public information on its finances.

In 2017, Volcan raised an estimated $4.4 billion debt through the issue of convertible notes to buy a 19.35 per cent equity stake in Anglo American plc pledging 33 per cent of Vedanta shares as security for annual interest payments of $185 million.

Vedanta has a requirement under its bank loans to remain a listed company and will, therefore, need approval or waivers from its lenders prior to delisting.

“The reporting and disclosure requirements for private companies are less stringent than for London-listed public companies,” Moody’s said.

For instance, private unlisted companies are not required to report when any of their shareholding is pledged against any borrowings.

“However, given its substantial access to international capital markets with $5.9 billion in debt outstanding at the holding company in the form of US dollar bonds and loans, we expect Vedanta to maintain its hitherto transparent reporting on operations even after it becomes a private entity,” it said.

“When successful, the proposed offer will result in Volcan as Vedanta’s sole shareholder, but Vedanta’s corporate structure remains highly complex with less than 100 per cent ownership in its key operating assets,” it added.