Vedanta Resources (VRL) is in talks with Standard Chartered Bank for a loan of $1.2 billion - $1.3 billion against brand fee receivables without any restructuring pre-conditions.
If the loan agreement is finalized, there won't be a need to restructure the bonds because debt repayments will be covered until January. The loan might have a three-year term and be priced between 14 per cent to 15 per cent based on current lending rate negotiations.
"VRL is in discussions with Standard Chartered Bank to raise $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. 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," The Economic Times citing sources.
The parent-firm of publicly listed Vedanta Limited, is currently in need of cash and is in the need of funds worth Rs 1.3 billion in FY24 and $4.3 billion in FY25.
The advisory firm Morrow Sodali has been hired by VRL to identify the holders of its $1 billion 13.875 per cent bonds, $1 billion 6.125 per cent bonds due in 2024, and the $1.2 billion 8.95 per cent bonds due in 2025. A non-deal roadshow in Singapore and Hong Kong is also on the cards next week. This will be done to gauge investors' interest in the company’s restructuring plans.
Early in August, S&P changed VRL's outlook from Stable to Negative because refinancing risks had escalated in the face of a challenging funding environment and a liquidity shortage. If VRL doesn't make headway in obtaining money by the end of December 2023 or if they participate in distressed debt exchanges, S&P warned that their rating may be downgraded.
In FY23, VRL got $413 million from Vedanta Limited as brand fees, or 3 per cent of the business's revenue. A liability management service has been proposed by analysts as a way to postpone the maturity of debt on dollar bonds.
The price of the $1 billion 13.875 per cent bond, which is due in August 2024, has increased by two points to $87 from $85, while the price of the $1 billion 6.125 per cent bond, which is due in August 2024, has increased by two points to $62.50 from $60.50.
Anil Agarwal, the company's chairman, has notified some investors of the company's financial strategy and his prospective desire to sell an additional 5 per cent of Vedanta Limited and a tiny share in Hindustan Zinc in January to raise money if required.
In order to pay off debt, VRL has previously sold a portion of its ownership in Vedanta Limited, raising almost $700 million in July.