Vedanta in talks to raise upto $2.5 bn to repay overseas bondholders

Vedanta Resources (VRL), the diversified mining company headquartered in London, is giving final touches to a plan to raise up to $2.5 billion (about Rs 20,800 crore) as debt repayment deadlines near.

The company owned by billionaire Anil Agarwal plans to do this by a combination of instruments, including issuing preference shares in the holding company to a slew of offshore investors from West Asia, and taking on another loan to refinance older debt at a higher interest rate.

VRL, which is the group’s holding company, is also looking to sell part of its 63.71 per cent stake in the Indian listed subsidiary Vedanta Ltd to meet funding requirements, said a banker close to the development.

The debt and equity transactions to be announced this month will help the group to pay upfront cash to bonds that are maturing next year.

“The refinancing of upcoming maturities continues to be something that the company is working on.

"No comment can be made at this time about the outcome of the exercise but the company remains confident in its ability to effect a successful process,” a Vedanta spokesperson said.

About $1 billion of VRL’s overseas bonds will mature on January 21, followed by $951 million of bonds maturing on August 9. Another $1.2 billion of bond repayment will come up in March 2025, and $600 million by April 2026.

Bankers said secured creditors of VRL have formed a separate group from the unsecured creditors to aggressively seek a better package reflecting their secured status during the bond restructuring.

The January 2024 and March 2025 bonds are guaranteed by the group’s other holding companies Twin Star Holdings and Welter Trading, apart from a guarantee provided by the ultimate holding company VRL.

These bonds are also backed by shares of Vedanta Ltd, whereas the August 2024 bonds are unsecured.

Some of the January 2024 and March 2025 bondholders — Oaktree Capital and Avenue Capital — have also appointed London-based law firm Cleary Gottlieb Steen & Hamilton LLP as their legal advisor and lead negotiator with VRL.

These bondholders are seeking 75 per cent upfront cash payment for the January 2024 bonds, and a higher upfront amount for the March 2025 bonds.

In the past, group chairman Agarwal had reiterated that the group would not default on any of its loans as VRL raised $1.35 billion worth of loans in the ongoing financial year.

Of this, $850 million was raised from JP Morgan and Oaktree, while Vedanta’s rivals Glencore and Trafigura provided it $250 million and $200 million, respectively, amid a rising interest rate environment.

Meanwhile, Vedanta Ltd has undertaken an exercise to demerge its different businesses into six listed companies.

Agarwal has promised to sell the steel unit by March next year to help it repay its debt.

But the demerger exercise hinges on support from Indian lenders which have sought clarity on the cash flow of each unit and which listed entity will ultimately be responsible for repaying their loans.

In the last two years, VRL has repaid part of its loans by receiving dividends from Vedanta Ltd and its subsidiary, Hindustan Zinc Ltd.

The promoter’s entire stake in both India listed companies are pledged.