Vedanta Resources Plans $700 Million Offshore Bond Raise

Vedanta Resources, a diversified conglomerate led by London-based billionaire Anil Agarwal, is embarking on a journey to raise $700 million through the sale of bonds to international investors.

In a strategic move, the company intends to conduct a tender offer aimed at repurchasing certain existing bonds slated to mature next year.

The funds will be sourced through Vedanta Resources Finance II Plc, with the backing of Twin Star Holdings and Welter Trading, both subsidiaries of the mining and metals giant.

Together, these subsidiaries hold a substantial 38.1% stake in Vedanta Ltd, a majority-owned subsidiary of Vedanta Resources.

The issuance commenced on a Friday, signaling the company’s proactive stance in the market.

As of the end of the fiscal year 2020, Vedanta Resources carries a standalone debt of $7.3 billion, with a significant portion due for repayment by September 2022. However, the company anticipates servicing these obligations through cash flows generated by its underlying subsidiaries. At the group level, the consolidated debt stands at approximately $15 billion, against an EBITDA of $2.6 billion.

“This tender offering targets bonds maturing in 2021 and is structured as a 144A issue, opening avenues for investment from US-based entities,” revealed a source familiar with the proceedings.

Leading financial institutions such as JP Morgan, Barclays, Deutsche Bank, Citigroup, DBS, Standard Chartered, and Credit Suisse are acting as arrangers for the issuance.

The fundraising initiative is integral to Vedanta Resources’ efforts to reassure lenders. By replacing old bonds with new ones, the company aims to extend maturities, thereby enhancing financial flexibility.

“We anticipate a mix of existing bondholders exchanging old series for new ones, along with a fresh influx of investors,” stated a key participant in the exercise.

Vedanta Resources has affirmed its commitment to the fundraising endeavor.

“This bond issuance aligns with standard debt management practices aimed at extending debt maturity. The structure and nature of the offering adhere to industry norms,” clarified a company spokesperson.

This move comes in the wake of the company’s unsuccessful attempt to delist from Indian bourses in October. Despite announcing a $2.5 billion delisting plan, Vedanta Resources fell short of securing the requisite number of shares.

Recent reports suggest that Vedanta Resources is contemplating increasing its stake in Vedanta Ltd by up to 25%.

Earlier in August, Vedanta had successfully raised nearly $1.4 billion through bond sales, in addition to securing a $1 billion debt facility. However, the company plans to repay these facilities following the setback in its delisting efforts.

S&P has assigned a B minus long-term issue rating to Vedanta’s proposed guaranteed senior unsecured notes, citing concerns over the company’s tight liquidity position.

“The negative outlook reflects the looming challenge posed by Vedanta Resources’ substantial debt maturities in the coming years,” noted S&P Global Ratings in a statement.

“The issue rating remains consistent with the issuer credit rating on Vedanta Resources (B-/Negative/–). We refrain from notching the issue rating for subordination risk, given the uncertainty surrounding the priority of claims in a bankruptcy scenario, particularly within the Indian jurisdiction,” the statement concluded.