Asarco acquisition not to impact rating of Vedanta Resources soon: S&P
05 June 2008
Standard & Poor's Ratings Services said today that there would not be an immediate impact on its ratings on Vedanta Resources PLC (BB/Negative/--) following the company's recent announcement of a bid to acquire the operating assets of Asarco LLC (Not rated) for $2.6 billion in cash.
While the proposed acquisition is subject to approval, the successful conclusion of this transaction, in itself, should not place any additional pressure on the current ratings. Nevertheless, if the proceeds for the proposed acquisition are funded entirely through incremental borrowings, this may exhaust the company's enhanced debt-capacity and take away the positive momentum for a potential improvement in the ratings.
The negative outlook reflects the uncertainty around the mining of bauxite in Orissa, India; the risks on the company's financing for its power-generation investment; and strategies to mitigate funding, project completion, and counterparty-related risks.
The ratings and outlook continue to factor in the company's committed capital plans, aggregating to about $6.5 billion (composed of phase II of Vedanta's stated capex plans and a $900-million expansion announced by Hindustan Zinc Ltd. [HZL], in which Vedanta has a 65-per cent stake)