Vedanta Raises $1 b via Bond Sale to Reduce Debt Burden
Offers coupon rate of 6.125% for latest sale as part of plan to refinance $1.8b debt
Mumbai: Metals magnate Anil Agarwal’s Vedanta Resources on Friday announced that it has raised $1 billion through a bond sale, the proceeds of which would largely be used to refinance expensive debt. On July 27, ET was the first to report the proposed sale and road-shows to drum up investor support for the issue.
The latest debt issuance is part of Vedanta’s “comprehensive refinancing plan” of $1.8 billion debt announced by the company last week. Vedanta had said that it planned to raise the cash through a mix of bonds and term loans. The coupon rate for the latest sale is 6.125% and the bonds are due in 2024.
Vedanta intends to use the proceeds to buy back its outstanding loans of $774.8 million due in 2019, and $900 million due in 2021, and to “repay other indebtedness”. It had accepted to purchase $522.5 million of the 2019 bonds, and $229.8 million of the 2021 bonds.
“The transaction is in line with our stated financial strategy to strengthen our balance sheet. We have taken a number of proactive measures over the last year to extend maturities, optimise our funding structure and as a result have created value for all stakeholders. We are pleased with the strong response these bonds have received, displaying investor confidence in Vedanta’s credit story,” Anil Agarwal, chairman, Vedanta Resources, said in a statement.
Apart from the bonds, the company has also received commitments from global and Indian banks for $840 million of term loans, with final maturity of 5 years. These funds will also be used in the refinancing.
ET reported on July 27 that bankers associated with the bond-sale exercise were conducting investor road-shows in North America, Europe, Middle East and Asia to gauge “market appetite” for the issue.
Vedanta’s gross debt stood at $18.2 billion at the end of 2016, and the company reduced it further by $1.4 billion after March 31, 2017. Net debt stood at $8.5 billion. The company’s Indian subsidiary Vedanta Limited reported a net debt of .₹ 19,024 crore at the end of the April-June quarter. The current announcement, clubbed with the $1-billion bond sale that the company undertook in January, will extend Vedanta’s debt maturity level by 1.5 years and bring down the cost of borrowing, resulting in no significant debt maturities till December, 2018.
Barclays, Credit Suisse, DBS, First Abu Dhabi, JP Morgan and Standard Chartered are acting as joint global coordinators for the exercise. Axis Bank, Barclays, Credit Suisse, DBS, First Abu Dhabi, ICICI Bank-IFSC Banking Unit, JP Morgan and Standard Chartered are also acting as joint lead managers and joint book-runners. The new issuance was oversubscribed 2.6 times at the initial price guidance and was distributed widely, with 50% final allocation to Europe, 30% to Asia and 20% to US.