Vedanta Resources Ltd (VRL), the UK-headquartered mum or dad firm of Vedanta group, mentioned it has secured a USD 1.25 billion mortgage from non-public credit score lenders to refinance/repay a part of the USD 3.2 billion debt maturing in 2024 and 2025, however this didn’t stop S&P Global from downgrading its scores.
In an announcement, Vedanta Resources mentioned the fundraising will assist “create a long-term sustainable capital structure” and exhibit its continued potential to entry international capital markets and investor confidence within the underlying enterprise.
Without disclosing the names of the lenders, it mentioned loans have been raised from a gaggle of respected monetary establishments to refinance current liabilities.
In parallel, the corporate is looking for the consent of current bondholders to increase the debt maturity and amend sure covenants and search waivers to enhance the credit score bundle of its bonds which are resulting from mature in 2024.
Unimpressed, S&P Global downgraded Vedanta Resources to ‘CC’ from ’CCC’ on potential bond extensions and continues to maintain it on CreditWatch Negative checklist.
“The successful completion of a liability management exercise initiated by Vedanta Resources Ltd to extend the maturities of three of its US dollar-denominated bonds will constitute a distressed exchange under our criteria,” the score company mentioned.
In case the UK-integrated commodity producer doesn’t proceed with the transaction, S&P noticed rising dangers of a traditional cost default. This is given USD 1 billion in bonds due on January 21, 2024, and restricted progress on alternate reimbursement plans.
“We view Vedanta Resources’ proposed liability management exercise involving three of its US dollar-denominated bonds totaling USD 3.2 billion as a distressed transaction under our criteria,” it mentioned.
As a part of the train, the corporate intends to handle the three bond maturities utilizing a mixture of money and new bonds. Accordingly, it can alternate about half of the January 2024 bond with new bonds maturing in January 2027, and a lot of the August 2024 and March 2025 bonds with new amortizing bonds maturing in December 2028.
Vedanta Resources didn’t say if the brand new USD 1.25 billion credit score was geared toward addressing these three loans maturing subsequent yr.
S&P mentioned the corporate has about USD 4.5 billion in debt maturities via March 2025.
On the brand new USD 1.25 billion credit score facility, the score company mentioned it didn’t regard attributes of the transaction — similar to larger coupons on the August 2024 bond and March 2025 bonds, and sure further structural enhancements on the bonds — as offering sufficient offsetting compensation for the extension of the maturities.
“This is because the transaction also gives priority to the sizable cash flow and proceeds from asset sales to a new USD 1.25 billion private credit facility over the other creditors.”
As a part of the transaction, the non-public credit score facility could have precedence entry to model charge funds by subsidiary Vedanta Ltd to Vedanta Resources.
“While the group has securitized the brand fee payments to other lending facilities since late 2021, we believe the quantum of the brand fee and its proportion to the total cash flow available to Vedanta Resources to service debt will represent 40-50 per cent of the total cash flow at Vedanta Resources, excluding extraordinary dividends. This is up from less than 20 per cent previously,” it mentioned.
In addition, till USD 750 million of the non-public credit score facility is repaid, it can have precedence over extraordinary dividends that any asset gross sales at Vedanta Ltd might generate. The group will thereafter distribute proceeds equally between the non-public credit score facility and bondholders till it absolutely repays the non-public credit score facility.
“Furthermore, unlike numerous similar transactions globally, there are no haircuts on the principal or coupon amounts of the three bonds, indicating Vedanta Resources’ willingness to pay. The new notes will have a coupon of 13.875 per cent,” it added.
In the assertion, Vedanta Resources mentioned the brand new mortgage will mature in April 2026, and is assured by it and its numerous subsidiaries. It has been collateralised by a destructive pledge of 13.26 per cent shares held by the mum or dad in India-listed Vedanta Ltd and the annual model charge it receives from numerous subsidiaries.
Vedanta Resources, Vedanta Resources Finance II, Twin Star Holdings and Welter Trading introduced the proposed restructuring of 4 units of bonds – USD 1 billion of debt due January 2024, USD 1 billion due in August 2024, USD 1.2 billion due in March 2025 and USD 600 million due in 2026.
Billionaire Anil Agarwal’s Vedanta Resources had earlier mentioned that’s seeking to refinance USD 3.8 billion value of bonds maturing between 2024 and 2026 with loans of prolonged maturities and manageable measurement.
The mining conglomerate has about USD 1 billion of bonds maturing in January subsequent yr, adopted by the same measurement arising for cost in August 2024. Another USD 1.2 billion bonds are due in March 2025 and one other USD 600 million in April 2026.
(This story has not been edited by News18 employees and is printed from a syndicated information company feed – PTI)
