Viceroy Questions Vedanta's $750 Mn Bond Issue; Group's Response Creates More Doubts

Global ratings agency Moody’s on Monday revealed that Vedanta Resources Ltd (VRL) plans to raise $750 million through senior unsecured bonds to refinance its existing debt. However, US-based short seller Viceroy Research raised doubts about the bond issue, claiming the company had already taken out a loan to fund the debt refinancing. In its response, Vedanta clarified that part of the earlier loan was used for a different debt repayment.

The issue centers on the $550 million private credit facility (PCF), which is due in April 2026 and carries an 18% interest rate. In its June earnings call, the Anil Agarwal-led group told analysts that it had secured a $600 million term-loan facility to pay off the above-mentioned dues.

In the same month, PTI, citing company documents, reported that Vedanta Resources, the London-based parent of Vedanta Ltd, had secured a $600 million syndicated loan from a group of banks. The consortium included Gulf, Japanese, and European banks, such as First Abu Dhabi Bank, Mashreq, Sumitomo Mitsui Banking Corp, and Standard Chartered.

The report noted that $380 million of the loan had been committed, with the remaining $220 million expected to be finalized shortly. This term loan was expected to refinance the $550 million PCF.

On Monday, the US short seller claimed, "It appears that these funds have been spent on other uses."

"We did not disclose this referral as we understood that Vedanta Resources had completed its debt-raising activities and repaid the PCF in full. The sudden fundraising activity while under ED investigation introduces a material undisclosed regulatory risk for bondholders," the short seller added.

Vedanta's Response

In a statement to Mint, a spokesperson for the Anil Agarwal-led mining group said that the term loan secured in June was only $500 million. About $250 million of this was used for servicing other debt, while the remainder remained undrawn.

The company did not clarify why it is now raising $750 million in bonds or what will happen with the $250 million undrawn credit.

Moody’s said on Monday that any shortfall for the repayment of the PCF would be met from the company’s existing syndicated bank facility, of which about $250 million remains available.

This comes after Viceroy, in July, accused Vedanta of being a "parasite" that is "systematically draining" its Indian subsidiary to meet its own debt obligations. The firm claims Vedanta Resources is financially unsustainable and poses significant risks to its creditors. The Agarwal family-led company has denied the allegations.

"The refinancing of higher-cost debt, coupled with a more favorable interest rate environment, should improve VRL's interest coverage ratio, measured by adjusted EBIT/interest expense, to about 2.5x by fiscal 2027 (financial year ending March 2027), from 1.9x in fiscal 2025," said Nidhi Dhruv, Moody’s Ratings Vice President and Senior Credit Officer, and lead analyst for VRL.

Moody’s has rated the new debt proposal B2, five notches below India’s sovereign rating of Baa3.

"VRL’s senior unsecured bonds are rated B2, one notch lower than the B1 CFR, reflecting the structural subordination of the holding company’s bondholders to creditors at the rest of the group. Furthermore, the majority of debt at the operating companies is secured. We estimate the operating companies’ claims account for around 80% of total consolidated claims as of March 2025, with the remaining claims distributed across VRL and its intermediate holding companies that have direct shareholding in Vedanta Limited (VDL)," the agency said.

Moody’s added that VRL benefits from large-scale, diversified, low-cost operations across commodities including zinc, aluminum, iron ore, oil and gas, steel, and power, with a strong market position and historically stable margins. Recent liability management, including debt reduction and refinancing, has cut holding company debt from $9.1 billion (March 2022) to $4.8 billion (June 2025), reducing reliance on operating company dividends while maintaining a coverage ratio above 2x.