Vedanta Resources Seeks $500 Million Loan to Meet Repayment Obligation

Vedanta Resources Seeks $500 Million Loan to Meet Repayment Obligation

VoM News Desk | November 2, 2023 | 01:46 PM IST | Breaking News | Follow on Google News

Vedanta Resources Seeks $500 Million Loan to Meet Repayment Obligation

Vedanta Resources Seeks $500 Million Loan to Meet Repayment Obligation

Vedanta Resources (VRL) has initiated negotiations with Cerberus Capital Management and Varde Partners to secure a $500 million loan, according to a report by The Economic Times published on November 2. This loan is a critical part of the company’s efforts to fulfill a substantial $1 billion repayment obligation due in January.

Negotiations with Multiple Parties for Remaining Funds

In addition to discussions with Cerberus and Varde, Vedanta is reportedly in talks with Standard Chartered Bank and other credit funds to secure the remaining $500 million to $600 million needed to meet its repayment obligation. It’s worth noting that the new loan is expected to come with a significantly higher interest rate, approximately 17-18%, compared to previous prepayments from Oaktree and Trafigura, which featured rates below 13%.

Utilization of the New Financing

The new financing, if secured, will be used for the prepayment of various bonds, including 55% of the 13.875% bonds due in 2024, 5% of the 6.125% bonds maturing in August 2024, and 20% of the 8.95% bonds set to mature in March 2025. However, spokespersons for Cerberus, Varde, and Vedanta did not respond to The Economic Times’ requests for comment.

Ongoing Discussions and Potential Restructuring

The report mentioned that Vedanta initially proposed a loan size of $1.2 billion, but private credit funds and lenders have adjusted it to a $1.1 billion deal. Additionally, discussions between Vedanta Resources and its bondholders are still ongoing regarding the final terms of restructuring as part of a liability management exercise.

Certain bondholders have indicated their intent to proceed with an upfront payment of $550 million by January 2024, along with an additional $100 million in consent fees, making up 65% of the bond’s total value.

The proposed loan is expected to be backed by brand fee receivables. Vedanta has offered upfront payments of 55% for January 2024 bonds, 5% for August 2020 bonds, and 20% for March 2025 bonds. However, bondholders appear to be divided, with some seeking increased payments, potentially resulting in a payout for January 2024 bonds reaching 65 cents.

Moreover, the restructuring is anticipated to involve a 3% consent fee, roughly equivalent to $100 million, with restructured bonds expected to carry a 14% interest rate and collateral ranging from 75% to 200%.

Disclaimer: The opinions and suggestions provided in this article are those of individual analysts and do not reflect the viewpoints of VoM News. We encourage investors to consult with certified experts before making any investment choices.

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