The company, controlled by London-based billionaire Anil Agarwal, plans a tender offer to buy back some existing bonds that are maturing next year.
The funds are being raised by Vedanta Resources Finance II Plc and guaranteed by Twin Star Holdings and Welter Trading, two subsidiaries of the mining and metals multinational.
The two arms together own 38.1% in Vedanta Ltd, which is a 50.1% subsidiary of Vedanta Resources.
The company launched the issuance on Friday.
Vedanta Resources has standalone debt of $7.3 billion as of the end of financial year 2020, of which a term loan of $1.9 billion is due by September 2022. These can be serviced through cash flows from the underlying subsidiaries. The consolidated group debt is around $15 billion against earnings before interest, tax, depreciation and amortisation (Ebitda) of $2.6 billion.
“This is basically a tender offering of bonds which are maturing in 2021. It is a 144A issue and so US–based entities can also invest in the offering,” said a source with direct knowledge of the matter.
JP Morgan, Barclays, Deutsche Bank, Citigroup, DBS, Standard Chartered and Credit Suisse are the arrangers to the issue.
Vedanta Resources confirmed to ET that it was raising funds.
“This is a standard bond issuance and debt management activity that companies do and help extends debt maturity. The offering is fairly standard structure and product,” a company spokesperson said.
The transaction could be the first such offering after its failed delisting plans from Indian bourses in October. Though the company announced a $2.5 billion delisting plan through a reverse book building process, it could not complete the process as promoters failed to secure the required number of shares.
Vedanta Resources is thinking of raising promoter’s stake by up to 25% in Vedanta Ltd, ET reported on November 19.
Vedanta had raised nearly $1.4 billion by selling bonds in August to buy back shares from investors, besides another $1 billion debt facility. However, the group said it would repay these facilities as the delisting plans had failed.
Ratings agency S&P has assigned a B minus long-term issue rating to Vedanta’s proposed guaranteed senior unsecured notes.
“The negative outlook on Vedanta Resources reflects the company's tight liquidity position due to its large debt maturities over the next few years,” S&P Global Ratings said in a note on Dec 3.
“We rate the proposed notes the same as the issuer credit rating on Vedanta Resources (B-/Negative/--). We do not notch the issue rating on the notes for subordination risk because a majority of the company's assets are in India, a jurisdiction where we believe the priority of claims in a bankruptcy scenario is highly uncertain.”
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