London-headquartered Vedanta Resources (VRL) is in talks with a clutch of foreign investors to raise $1.25 billion, ahead of its debt maturity of $1 billion in January 2024. The debt, which would be raised at higher interest rates than existing ones, is expected to be finalised as early as next week.
A VRL spokesperson confirmed the development but did not disclose the names of the investors with whom the firm is in discussions.
According to a Bloomberg report, Vedanta is expected to sign the private loan in the next few days. The company is in talks with New York-based Cerberus Capital Management for a $300 million loan, Davidson Kempner Capital Management and Varde Partners for $200 million each and alternative investment firm Ares SSG for about $100-150 million.
VRL is also in talks with Edelweiss Alternative, BlackRock and others, it said, adding the loans would be taken for three years at 18% interest. The disbursements are expected to happen in January, sources close to the development said.
Generally, interest rates for foreign debt range from 10-12% and in some cases have gone up to 15%.
“We are in the process of finalising raising of $1.25 billion for refinancing and managing our upcoming maturities. We are at an advanced stage of these discussions and continue to engage with bondholders simultaneously,” a Vedanta spokesperson said in an email reply to FE.
The funding, which will be secured by VRL’s shares, is necessary for the firm to prevent a possible default.
VRL has a debt maturity of $1 billion in 13.875% bonds due in January 2024, which the company wants to refinance by December, and another $1 billion due in August 2024. Furthermore, it has debt obligations of $3.1 billion in FY25.
On Wednesday, Hindustan Zinc (HZL), in which Indian mining major Vedanta (VEDL) holds a majority stake, declared an interim dividend of 6 a share interim for FY24, amounting to a total outgo of Rs 2,535.19 crore. Following the issuance of the dividend, VEDL will get Rs 1,645 crore in lieu of the 64.92% stake it holds in HZL.
The issuance of the dividend comes at a time when VEDL and its parent VRL were seeking to shore up funds to trim debt.
In November, VEDL CFO Ajay Goel said VRL barely has any maturities in Q3. “The next port of call remains in the fourth quarter, and sometime in January, almost $1 billion of bonds. We need almost $1 billion at VRL in the next six months’ time, for which we have multiple options.
We’re engaging with the many bankers, and looking at Vedanta’s ability to raise resources, our deep engagement with the capital markets, I think that will be addressed,” he said in an analysts’ call. Brokerages were optimistic that the company would be able to “successfully” restructure its bonds.
“Our expectations are underpinned by management’s demonstrated willingness to repay its upcoming debts in full, and that management seems to be open to sweeten the restructuring offer based on bondholder feedback,” CreditSights said in a report in November, adding, that the final restructuring terms are still unclear.
In an earlier report, CreditSights opined that VRL can tap into various funding levers to fund the gap, including a $1.7 billion short-term investments in various bank deposits, quoted bonds and mutual funds as of March 31. Pledging of residual promoter stake in Hindustan Zinc for up to 3.9% stake and raising funds by VRL, either by selling or pledging its stakes, were other options.
According to S&P, Vedanta Resources is moving forward with refinancing, but there are still execution risks.