S&P Global Ratings has downgraded debt-laden Vedanta Resources Ltd to ‘selective default’ after the mining conglomerate concluded a deal with creditors to extend the maturities of its three-dollar bonds.

“We view Vedanta Resources’ just concluded liability management exercise, which involved three of its US dollar-denominated bonds, as a distressed transaction,” the rating agency said in a statement.

The junk-rated Vedanta had last week stated that its bondholders have approved the extension of the maturities of $3.2 billion of bonds maturing in 2024 and 2025.

Under the deal, the company will pay $779 million upfront, with the remaining principal extended by as much as four years.

“On January 12, 2024, we lowered our long-term issuer credit rating on Vedanta Resources to ‘SD’ (selective default) from ‘CC’. We also lowered the issue ratings on the company’s bonds due January 2024, August 2024, and March 2025 to ‘D’ from ‘CC’,” S&P said.

“We regard the Vedanta transaction as distressed, and not simply opportunistic,” S&P said.

This is because “the likelihood of a conventional default in the absence of the transaction was high” due to Vedanta’s large upcoming debt maturities and reduced access to both internal cash flow and external financing.

PTI