Extension of Albanese's tenure credit neutral for Vedanta: Moody's

KOLKATA: Moody's Investor Service has said Vedanta Resources' announcement on March 30, 2017 about an extension of CEO Tom Albanese's tenure by five months till August 31, 2017 following which it will appoint a successor, will have no immediate impact on the company's B1 corporate family rating, B3 senior unsecured bond ratings, and stable outlook.

"Our ratings on Vedanta plc continue to reflect our expectation that the company will remain focused on its core operations and its operating and financial metrics will improve with recovering commodity prices," Moody's said in a report on Tuesday.

"In particular, we expect the earnings expansion to increase the pace of correction in the company's leverage. We do not expect any change in the company's strategic direction or any interruption in its daily operations, given its established operating track record and progress made to achieve its strategic priorities, which include de-leveraging its balance sheet and simplifying its group structure," the Moody's report added.

"Achievement of these objectives, if they result in lower leverage and if the company adheres to a prudent financial policy, will be credit positive," it said. For example, the recent special interim dividends paid out by Vedanta plc's subsidiaries, Vedanta Limited (unrated) and Hindustan Zinc Limited (unrated), will improve group liquidity and alleviate near-term refinancing risk to the extent proceeds are applied towards debt reduction.

"We will closely monitor the progress on execution of company's strategies following the appointment of a new CEO later this year. As such, any deviation in its stated strategy -which indicates an increase in risk appetite or aggressive financial policies -- will weigh negatively on its ratings," the report added.

Moody's expects the earnings expansion to increase the pace of correction in the company's leverage.