Vedanta Resources Ltd faces a second of reckoning this week as Indian billionaire Anil Agarwal’s miner seeks approval for a proposal that might assist it purchase extra time to honor its debt liabilities.
Bondholders have till Jan. 2 to present an early consent on a plan to push out due dates on $3.2 billion in bond repayments, a transfer that prompted S&P Global Ratings in December to chop the corporate’s ranking deeper into junk.
Vedantaneeds a inexperienced mild from not less than two-thirds of the bondholders in every of the three securities to proceed with the plan. A holder assembly shall be held on January 4.
The bid to revise the phrases of its greenback bonds marks the most recent try by Agarwal’s group to bolster its stability sheet, having already bought a stake in its Mumbai-listed subsidiary and secured a $1.25 billion non-public mortgage. But the actual fact Vedanta borrowed cash at 18% to refinance debt underscores issues about its funds.
What is Vedanta’s newest proposal to chop its debt load?
The miner is providing to pay $779 million by early February for notes due this yr and 2025, and plans to increase the maturity on the remaining principal by as many as 4 years.
There is not any proposed change to the principal quantity or the coupon on notes due in April 2026. The miner is in search of approval to revise the mounted cost protection ratio, a leverage covenant.
What are S&P Global and bondholders saying?
S&P reduce Vedanta Resources’ ranking to CC from CCC, saying the transfer will seemingly end in a downgrade to selective default. Still, it expects “good earnings and strong cash flows” on the group as commodity costs enhance and its Indian models ship again $400 million-$500 million in dividends annually — a key supply of funds for the UK-based mother or father.
A gaggle of adhoc holders of the corporate’s assured notes have stated that the agency didn’t embrace any suggestions from them, and due to this fact the proposal doesn’t characterize one of the best phrases attainable for the notes. Vedanta responded saying that it has engaged with many noteholders earlier than arriving on the plan.
The miner additionally prolonged consent deadline for all of the three greenback bonds by a couple of days to accommodate suggestions from bondholders who had been dealing with operational challenges amid year-end holidays.
What ought to bondholders do?
Research agency CreditSights recommends bondholders give their consents for the amendments as a result of the revised phrases are extra engaging.
But S&P Global is skeptical.
That’s as a result of Vedanta hasn’t offered enough compensation for the extension of maturities, the rankings assessor stated. The firm can also be prioritizing money flows and proceeds from asset gross sales to satisfy obligations from the $1.25 billion credit score facility over the opposite collectors, S&P added.
If Vedanta fails to get the required help, the main focus will shift to the corporate’s skill to honor its $1 billion bond due January 21.
The greenback notes due this month had been essentially the most supportive of the agency’s legal responsibility administration train, whereas the remaining three commerce beneath the 80 cents on the greenback mark usually thought-about indicative of misery.
Some Vedanta Bonds Trade in Distressed Territory
Still, the bond due in August 2024 rose 3.5 cents on the greenback in December to 66.4 cents, in accordance with Bloomberg-compiled information. That’s the most important month-to-month acquire since September. Those on March 2025 notes superior 3.1 cents to 74.4 cents.
How did the corporate change into such an enormous participant?
Agarwal, who was raised within the Indian state of Bihar, took over his father’s enterprise making aluminum conductors within the Nineteen Seventies, after which branched into buying and selling scrap metallic.
He constructed Vedanta Ltd. by means of a sequence of bold acquisitions: In 2001, Agarwal purchased a controlling stake in then government-owned Bharat Aluminium Co. and he adopted that up with the acquisition of one other state-run agency, Hindustan Zinc. He efficiently bid for iron ore producer Sesa Goa Ltd. in 2007 and for Cairn India. Vedanta Resources additionally owns copper and zinc operations in Africa.
The firm was the primary in India to checklist in London again in 2003, earlier than Agarwal took it non-public 15 years later when his Vedanta Inc. purchased out minority traders as half of efforts to streamline the group’s construction. Agarwal has renamed Volcan Investments Ltd. to Vedanta Inc.
It is that this acquisition spree that precipitated the conglomerate’s debt to balloon.
Bondholders have till Jan. 2 to present an early consent on a plan to push out due dates on $3.2 billion in bond repayments, a transfer that prompted S&P Global Ratings in December to chop the corporate’s ranking deeper into junk.
Vedantaneeds a inexperienced mild from not less than two-thirds of the bondholders in every of the three securities to proceed with the plan. A holder assembly shall be held on January 4.
The bid to revise the phrases of its greenback bonds marks the most recent try by Agarwal’s group to bolster its stability sheet, having already bought a stake in its Mumbai-listed subsidiary and secured a $1.25 billion non-public mortgage. But the actual fact Vedanta borrowed cash at 18% to refinance debt underscores issues about its funds.
What is Vedanta’s newest proposal to chop its debt load?
The miner is providing to pay $779 million by early February for notes due this yr and 2025, and plans to increase the maturity on the remaining principal by as many as 4 years.
There is not any proposed change to the principal quantity or the coupon on notes due in April 2026. The miner is in search of approval to revise the mounted cost protection ratio, a leverage covenant.
What are S&P Global and bondholders saying?
S&P reduce Vedanta Resources’ ranking to CC from CCC, saying the transfer will seemingly end in a downgrade to selective default. Still, it expects “good earnings and strong cash flows” on the group as commodity costs enhance and its Indian models ship again $400 million-$500 million in dividends annually — a key supply of funds for the UK-based mother or father.
A gaggle of adhoc holders of the corporate’s assured notes have stated that the agency didn’t embrace any suggestions from them, and due to this fact the proposal doesn’t characterize one of the best phrases attainable for the notes. Vedanta responded saying that it has engaged with many noteholders earlier than arriving on the plan.
The miner additionally prolonged consent deadline for all of the three greenback bonds by a couple of days to accommodate suggestions from bondholders who had been dealing with operational challenges amid year-end holidays.
What ought to bondholders do?
Research agency CreditSights recommends bondholders give their consents for the amendments as a result of the revised phrases are extra engaging.
But S&P Global is skeptical.
That’s as a result of Vedanta hasn’t offered enough compensation for the extension of maturities, the rankings assessor stated. The firm can also be prioritizing money flows and proceeds from asset gross sales to satisfy obligations from the $1.25 billion credit score facility over the opposite collectors, S&P added.
If Vedanta fails to get the required help, the main focus will shift to the corporate’s skill to honor its $1 billion bond due January 21.
The greenback notes due this month had been essentially the most supportive of the agency’s legal responsibility administration train, whereas the remaining three commerce beneath the 80 cents on the greenback mark usually thought-about indicative of misery.
Some Vedanta Bonds Trade in Distressed Territory
Still, the bond due in August 2024 rose 3.5 cents on the greenback in December to 66.4 cents, in accordance with Bloomberg-compiled information. That’s the most important month-to-month acquire since September. Those on March 2025 notes superior 3.1 cents to 74.4 cents.
How did the corporate change into such an enormous participant?
Agarwal, who was raised within the Indian state of Bihar, took over his father’s enterprise making aluminum conductors within the Nineteen Seventies, after which branched into buying and selling scrap metallic.
He constructed Vedanta Ltd. by means of a sequence of bold acquisitions: In 2001, Agarwal purchased a controlling stake in then government-owned Bharat Aluminium Co. and he adopted that up with the acquisition of one other state-run agency, Hindustan Zinc. He efficiently bid for iron ore producer Sesa Goa Ltd. in 2007 and for Cairn India. Vedanta Resources additionally owns copper and zinc operations in Africa.
The firm was the primary in India to checklist in London again in 2003, earlier than Agarwal took it non-public 15 years later when his Vedanta Inc. purchased out minority traders as half of efforts to streamline the group’s construction. Agarwal has renamed Volcan Investments Ltd. to Vedanta Inc.
It is that this acquisition spree that precipitated the conglomerate’s debt to balloon.
