Fitch maintains rating watch negative on Cairn India Holdings, withdraws ratings
Sep 17, 2020
Singapore, September 17 : Fitch Ratings has maintained Cairn India Holdings Ltd (CIHL) long-term issuer default rating of B-plus on rating watch negative (RWN).
Fitch has also simultaneously withdrawn the ratings and will no longer provide ratings or analytical coverage of this issuer.
On June 10, Fitch placed CIHL's rating on RWN after Vedanta Resources Ltd (VRL) said it planned to delist the shares of its Indian subsidiary and CIHL's parent Vedanta Ltd (VLTD).
CIHL's rating is aligned with the credit profile of VLTD, reflecting their strong linkages and VLTD's 100 per cent ownership of CIHL.
The RWN reflects the risk that should the delisting succeed, Fitch will assess the linkage between VRL and VLTD as strong rather than moderate and the agency will view the group as a single economic block, as VRL will own 100 per cent of VLTD which will hold 100 per cent of CIHL.
"This will result in Fitch assessing the VLTD's credit profile based on the consolidated VRL group which we believe is weaker," it said.
The rating is maintained on RWN as the delisting has not been completed. The company is in process of getting the relevant regulatory approvals and plans to launch the reverse book building process after that.
CIHL has an environmental, social and corporate governance (ESG) relevance score of 4 which reflects issues related to overall board structure and composition, and effective management control.
Fitch said its assessment does not factor in any cash leakage from VLTD or CIHL aside from the dividends to VRL. CIHL invested in a structured product originated by VRL's shareholder Volcan Investment Ltd in January 2019 and it was subsequently unwound profitably in August 2019.
Various investors at the group voiced opposition to the transaction and VRL has since committed to abstain from similar transactions in the future.
However, Fitch believes that the absence of large and vocal minority investors at VLTD after the delisting might make it easier for Volcan to access the cash at the operating companies for its liquidity needs.
