Vedanta Resources, a London-based mining and resources company, is set to engage with offshore bondholders in Hong Kong and Singapore to discuss the possibility of rolling over $3.2 billion in bonds due in 2024 and 2025. This strategic move aims to assess bondholders' willingness to consider alternative terms.
As part of its debt management strategy, Vedanta Resources is also contemplating the early redemption of a portion of these bonds. This approach is designed to entice bondholders into agreeing to the proposed rollover, providing the company with more flexibility in managing its financial obligations.
The pivotal meetings with bondholders have been orchestrated by Standard Chartered Bank and JP Morgan. These gatherings are scheduled to take place from September 11 to 15, creating a platform for open discussions regarding the debt restructuring.
Vedanta Resources, led by Anil Agarwal, is the parent company of Vedanta Ltd, a prominent Indian-listed firm. The company currently grapples with various bonds, including:
Vedanta Resources faced significant challenges in securing debt financing through traditional channels, such as bank loans or private credit. To address these difficulties, the company employed unconventional strategies. This includes raising funds from rivals, specifically $200 million from Trafigura and $250 million from Glencore International AG. Additionally, Vedanta Resources increased its brand fees and sold a 4% stake in its Indian subsidiary.
Financial experts have noted that the company's actions, including stake sales and brand fee increases, are indicative of the hurdles it encountered while seeking conventional debt financing. In light of these challenges, rolling over existing bonds becomes a viable option for Vedanta Resources.
A recent report by Kotak Securities highlights Vedanta Resources' efforts to address its funding gap for FY24. These efforts include a stake sale in Vedanta Ltd, front-ending large dividends, raising brand fees (amounting to $413 million), and deferring a $450 million inter-company loan from Vedanta. Notably, in FY23, Vedanta declared dividends of ₹37,730 crore, with ₹25,698 crore being upstreamed to the parent company.
However, the report also underscores the looming challenge of servicing the $2.2 billion bonds maturing in FY25. With large dividends no longer a feasible solution, Vedanta Resources may be compelled to explore further divestments of stakes or assets in Vedanta Ltd.
This proactive approach reflects Vedanta Resources' commitment to navigating its debt obligations strategically and securing the financial stability needed for future growth and development.
In summary, Vedanta Resources is proactively engaging with offshore bondholders to explore debt rollover options as it faces challenges in traditional debt financing. This move, along with potential bond redemption, reflects the company's commitment to addressing its financial obligations and securing a stable financial footing.
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