Vedanta Secures $1.25 Bn For Debt Refinancing; S&P Downgrades Rating

Vedanta Resources Limited (VRL), the parent company of the UK-headquartered Vedanta Group, has hired private credit lenders to refinance/repay a portion of its USD 3.2 billion debt maturing in 2024 and 2025. announced that it has secured a USD 1.25 billion loan from This does not prevent S&P Global from downgrading its rating.

Vedanta Resources said in a statement that the funding will help it “build a long-term sustainable capital structure” and demonstrate continued ability to access global capital markets and investors’ confidence in its underlying business. He said it was a thing.

It did not name the lender, but said it had raised financing from a group of reputable financial institutions to refinance existing debt.

In parallel, the company is seeking consent from existing bondholders for debt maturity extensions and certain covenant amendments and waivers to improve the credit package for the bonds due in 2024.

Unimpressed, S&P Global downgraded Vedanta Resources from ‘CCC’ to ‘CC’ regarding a possible bond extension and kept it on CreditWatch’s negative list.

“The successful completion of the liability management exercise initiated by Vedanta Resources to extend the maturity of three US dollar-denominated bonds will qualify as a distressed exchange by our standards,” the rating agency said.

S&P saw an increased risk of traditional payment defaults if UK-incorporated commodity producers did not proceed with the transaction. This comes with his $1 billion bond due January 21, 2024, with limited progress on an alternative repayment plan.

“We view Vedanta Resources’ proposed debt management exercise involving three US dollar-denominated notes totaling $3.2 billion as a distressed transaction under our criteria.”

As part of the exercise, the company will use a combination of cash and new bonds to address three bond maturities. As a result, approximately half of the January 2024 bonds will be exchanged for new bonds due in January 2027, and most of the August 2024 and March 2025 bonds will be exchanged for new bonds due in December 2028. .

Vedanta Resources did not say whether the new USD 1.25 billion loan is intended to cover the three loans that mature next year.

The company has about $4.5 billion in debt maturities through March 2025, according to S&P.

For the new $1.25 billion credit facility, the rating agency believes that the attributes of the transaction (such as the coupon height of the August 2024 Notes and March 2025 Notes, and certain additional structural enhancements to the notes) provide appropriate offsetting compensation. He said that he did not consider it to be provided. For extension of maturity.

“This is because this transaction prioritizes significant cash flow and proceeds from the sale of assets into a new US$1.25 billion private credit facility over other creditors.”

As part of the transaction, the private credit facility will have preferential access to branded fee payments to Vedanta Resources by its subsidiary Vedanta Ltd.

“While the Group has been securitizing brand fee payments to other lending institutions since the end of 2021, the amount of brand fees and their proportion of the total cash flow available to Vedanta Resources for debt repayment is We believe it represents 40 to 50 percent of fees.”Vedanta Resources’ total cash flow, excluding special dividends. “This is up from less than 20 percent previously.”

In addition, until the US$750 million private credit facility is repaid, it will take precedence over any special dividends that may arise from the sale of Vedanta Ltd’s assets. The Group will then distribute the proceeds equally among the private credit facility and bondholders until the private credit facility is repaid in full.

“Furthermore, unlike many similar transactions around the world, there is no haircut on the principal or coupon amount of the three bonds, demonstrating Vedanta Resources’ willingness to pay.The new notes carry a coupon of 13.875 percent. It will be granted,” he added.

Vedanta Resources said in a statement that the new loan matures in April 2026 and is guaranteed by the company and its various subsidiaries. It is secured by a 13.26 per cent stake held by India-listed Vedanta’s parent company and annual brand fees that the company receives from various subsidiaries.

Vedanta Resources, Vedanta Resources Finance II, Twin Star Holdings and Welter Trading have 4 sets of USD 1.0 billion due in January 2024, USD 1.0 billion due in August 2024, and USD 1.2 billion due in March 2025. announced a plan to restructure its bonds. $600 million is expected to be paid in 2026.

Billionaire Anil Agarwal’s Vedanta Resources has previously said it is considering refinancing its $3.8 billion worth of bonds due between 2024 and 2026 with maturity extensions and manageable-sized loans. It was announced.

The mining conglomerate has about $1 billion in bonds due to mature next January, followed by a payment on a similar bond in August 2024. An additional $1.2 billion in bonds mature in March 2025, and another $600 million matures in April 2026.