Vedanta Resources Placed on Credit Watch by S&P

Strategic Insights -

Vedanta Resources, India's largest copper and zinc producer, has come under fire from credit rating agency Standard & Poor's, which has placed the company on credit watch. This move has sent Vedanta's stock price plummeting, touching 1,281p before closing 10p off at 1,305p. S&P's decision reflects concerns over Vedanta's significant capital expenditure program and appetite for debt-funded acquisitions in a severe industry downturn. The company's massive capital expenditure pipeline of over £4.7bn is expected to put a strain on its funding and liquidity during the current period of uncertain cash flow generation.

Key Takeaways:

  • Vedanta Resources has been placed on credit watch by Standard & Poor's, citing concerns over the company's capital expenditure program and debt-funded acquisitions.
  • The company's massive capital expenditure pipeline of over £4.7bn is expected to strain its funding and liquidity.
  • Xstrata's chief executive Mick Davis is looking to make a final defining acquisition, potentially making the company an attractive takeover target.
  • Lonmin, in which Xstrata holds a 26% stake, firmed up after the announcement.
  • Peter Hambro Mining was boosted on vague takeover talk, with Panmure Gordon advising clients to buy Fiberweb after the company announced a joint venture with Brazil's Petropar.
  • Imagination Technologies Group was disappointed by Apple's 9.5% stake increase, with some punters hoping for a takeover bid.
  • ToLuna improved after raising £28m to fund the acquisition of Greenfield Online's internet services arm from Microsoft.
  • Investor Eurovestech saw its stake in ToLuna reduced, but its remaining stake is now worth £46m.
  • Nature Group reported 30% higher pre-tax profits on 50% higher revenues.
  • Immersion Technology plans to name change to Solo Oil and acquire oil and gas assets in the US.

Statistics:

  • Vedanta Resources stock price: 1,281p (before falling 10p to 1,305p)
  • Xstrata's merger proposal to Anglo American was rejected by a 27p margin.
  • British stock market (Footsie) closed 11.56 points off at 4,241.01.
  • Wall Street dropped 67 points despite US consumer spending rising.
  • US consumer spending rise was 172 points.
  • Peter Hambro Mining rose 37p to 637p.
  • Fiberweb firmed up 41/4p to 691/4p.
  • Imagination Technologies Group lost 3/4p to 142p on profit-taking.

Sources:

  • Standard & Poor's (no date mentioned)
  • Vedanta Resources (no date mentioned)
  • Xstrata (no date mentioned)
  • Anglo American (no date mentioned)
  • Footsie (no date mentioned)
  • Wall Street (no date mentioned)
  • Peter Hambro Mining (no date mentioned)
  • Fiberweb (no date mentioned)
  • Imagination Technologies Group (no date mentioned)
  • ToLuna (no date mentioned)
  • Eurovestech (no date mentioned)
  • Nature Group (no date mentioned)
  • Immersion Technology (no date mentioned)