VEDANTA Resources (VRL) is in discussions with Standard Chartered Bank for a loan of US$1.2 billion to $1.3 billion against brand fee receivables without any restructuring pre-conditions.
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According to information obtained by the Daily Nation, the loan deal, if sealed, will take care of debt repayments until January without the need to restructure the bonds. The discussions regarding lending rates are currently in progress and the loan could be priced around 14-15% with a duration of three years.
The Report states that the company has appointed an advisory firm, Morrow Sodali, to identify the holders of its $1 billion 13.875 percent bonds and $1 billion 6.125 percent bonds due in 2024 and the US$1.2 billion 8.95 percent bonds due in 2025.
It is also planning to hold a non-deal roadshow next week in Singapore and Hong Kong to gauge investors’ interest in restructuring.
“VRL is in discussions with Standard Chartered Bank to raise US$1.2 billion to $1.3 billion against brand receivables of three years and the loan is expected to have a tenor of three years,” said a source. “If the loan is in place, the talks of bond restructuring will subside. Though they are running a parallel process to gauge investor interest for an exchange.” In early August, S&P had lowered VRL’s outlook from Stable to Negative due to increased risks in refinancing amid a tough funding environment and limited cash. S&P mentioned that a downgrade in VRL’s rating could happen if they don’t make progress in fundraising by the end of December 2023 or if they engage in distressed debt exchanges.
The report further states that VRL received $413 million as brand fee from Vedanta Limited in Financial Year 2023, which amounted to 3 percent of the company’s top line. Analysts have been suggesting a liability management service to extend debt maturity across dollar bonds.
It states that the bonds gained two points in Monday’s trading session, with the $1 billion 13.875 percent bond trading at $87, up from $85, while the $1 billion 6.125 percent bond due in August 2024 saw an increase from $60.50 to $62.50.
As part of its funding strategy, Anil Agarwal, the company’s chairman, informed certain investors of his intention to potentially sell another 5 percent of Vedanta Limited in January and small stake in Hindustan Zinc to meet repayments if necessary, the report continues.
VRL has already divested a portion of its stake in Vedanta Limited, raising approximately $700 million in July to meet debt repayments.
VRL, based in London and the parent company of Indian subsidiary Vedanta Limited, is facing a funding requirement of $1.3 billion in Financial Year 2024 and $4.3 billion in Financial Year 2025.
The company is dealing with challenges such as low opco cash balances, significant upcoming maturities, and high funding costs. The company is exploring alternative fundraising options, including the potential sale of subsidiary Electro-steel to generate inflows, the report states.
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