Vedanta Resources Raises $1.1 Bn Through a New Dual Tranche Bond Issuance

• Marquee investors from the United States, EMEA and Asia amongst major investors.
• Bonds are expected to be rated ‘B’ by S&P Global and ‘B2’ by Moody’s Ratings
• Moody's upgraded VRL corporate family rating (CFR) to B1 from B2 on back of recent moves.
• VRL has raised $3.1bn in USD bonds since September 2024.

Vedanta Resources has raised $1.1 billion through a new dual tranche issuance in international debt capital markets, the company said in a Singapore exchange filing.

As per the exchange filing, the bond issuance consists of two tranches – a $550mn tranche of 5.5 years tenor at 9.475% interest rate and a $550mn tranche of 8.25 years tenor at 9.850% interest rate. Both tranches garnered strong investor demand with the bonds receiving final orders of $3.4 bn from over 135 accounts, representing an oversubscription of 3.1x, the company said. The net proceeds will be used to prepay VRL’s outstanding bonds and pay any related transaction costs.

The final bonds allocation included 61% from Asia, 30% from EMEA, and 9% from US for the 5.5-Year Tranche and 54% from Asia, 30% from EMEA, and 16% from US for the 8.25-Year Tranche.

Ajay Goel, Chief Financial Officer said

The latest transaction marks the complete refinancing of Vedanta’s restructured bonds. The strong interest in the series of transactions reflects significant investor confidence in the several strategic steps that Vedanta has taken over the last several quarters in terms of delivering record production, cost rationalization and deleveraging.

VRL has refinanced $3.1bn in US dollar bonds since September 2024 through four successive international bond transactions. The total quantum of USD bonds raised by Vedanta marks the largest amount raised by an Indian issuer since 2022. The issuance marks an important step for VRL which has reduced it's debt by $4.6 billion over the past 3 years, bringing it to its lowest level in a decade.

Two major agencies, Moody’s and S&P Global upgraded VRL's and its instruments’ ratings citing recent developments. On January 13, Moody's said it had upgraded VRL’s corporate family rating to B1 from B2 and that on the senior unsecured bonds guaranteed by VRL to B2 from B3, a one notch upgrade, while maintaining a stable outlook. Moody’s has assigned a B2 rating to VRL's proposed senior unsecured bond issuance.

S&P Global too assigned a preliminary rating of ‘B’ on VRL’s senior unsecured notes on January 13. This is one notch upgrade from the current one. It has placed the rating on credit watch positive.

Vedanta Resources Raises $800 Mn from Global Investors Through New Bond Issue

• 1.5x oversubscription, strong demand from US, EMEA & APAC regions.
• Proceeds to be used to prepay Vedanta’s outstanding bonds.
• The issue is expected to be rated B- by Fitch Ratings & CCC+ by S&P Global Ratings.

Vedanta Resources Finance II PLC (VRF) said in a Singapore exchange notification that it has raised US$800 million by issuing new bonds. The issue comprises two tranches of bonds– one with an aggregate principal amount of US$300 million of 10.25% Bonds due 2028 and the other involving an aggregate principal amount of US$500 million of 11.25% Bonds due 2031.

The bonds are expected to be rated “B-” by Fitch Ratings Ltd. and “CCC+” by S&P Global Ratings and will be listed on the electronic platform of Singapore Exchange Securities Trading Limited (SGX-ST). VRF will use the net proceeds from the issuance of the new bonds to prepay Vedanta’s existing bonds.

The bond issue received final combined orders of US$1.19 billion, indicating an oversubscription of 1.5X. The bids were received from existing as well as new set of investors across Asia Pacific (APAC), Europe the Middle East and Africa (EMEA) and US with more than 90% participation from asset / fund managers across both the tranches. As per VRF’s stock exchange notification, the final allocation of the Bonds includes 32% from Asia, 36% from EMEA, and 32% from US for the bonds due in 2028. For the bonds due in 2031, the allocation includes 35% from Asia, 23% from EMEA, and 42% from US.

A spokesperson for Vedanta Resources said “We are delighted by the tremendous response to Vedanta’s $800 million bond issuance. With this, Vedanta has successfully refinanced $2 billion worth of outstanding bonds in the past few months. The huge confidence and trust of the global investor community in Vedanta is reflected in the significant geographical spread and marquee names who have participated in these issuances.

Our commitment towards attaining a balanced capital structure through deleveraging our balance sheet remains our top priority. We have also achieved optimisation of costs on the entire $2 billion, represented by a saving of ~3% p.a. for the Company. We are confident of continuing to deliver substantial value to our global and domestic investors in the years ahead, and we will continue to evaluate all financing options going forward.”

This new issue comes as Vedanta has been gradually deleveraging its balance sheet, improving its capital structure, and lowering its financial costs by tapping bond markets as part of its liquidity management exercise. It is redeeming bonds with higher interest rates and issuing newer ones with a comparatively lower interest rate. Vedanta Resources has reduced its net debt by ~ $1 bn in the first half and refinanced bonds of over US$ 1.2 billion in the current fiscal.

In September, Vedanta raised US$900 million, the company’s first dollar bond issue in more than two years, to prepay existing bonds. The US$ 900 million raise was at a coupon rate of 10.875 percent in a five-year US dollar-denominated bond. Following this, VRF exercised a tap option on its September bond issuance, raising a further US$ 300MN.

Vedanta Resources to Sell 2.6% Stake in Vedanta Ltd to a Group of Institutional Investors

Vedanta Resources, the parent company of Indian metals-to-oil firm Vedanta, has decided to sell a 2.6% stake in Vedanta Ltd to a group of institutional investors,reported Reuters. This move comes as an U-turn from a week ago when Vedanta Chairman Anil Agarwal stated that there were no plans for a stake sale by the company's controlling shareholders.

The stake will be sold through Vedanta Resources' unit, Finsider International, which held a 2.63% stake in Mumbai-listed Vedanta as of March-end. The financial details of the deal and the names of the investors have not been disclosed yet. This decision aligns with Vedanta Resources' commitment to significantly deleverage its balance sheet.

The decision by Vedanta Resources to sell its stake in Vedanta Ltd could be influenced by several factors.

Vedanta Resources may be aiming to reduce debt on its balance sheet. Selling a stake in Vedanta Ltd could provide liquidity and help them manage their financial obligations more effectively. Companies often reassess their portfolio and strategic priorities. By divesting a stake, Vedanta Resources might be reallocating resources to focus on other core businesses or investment opportunities.

The total gross debt of Vedanta Resources stood at $6 billion as of March 31. On completing the stake sale, the firm would have reduced its debt by $650 million so far in fiscal 2025.

The timing of stake sales can be influenced by market dynamics. If Vedanta Ltd's stock price is favorable, it could be an opportune moment for Vedanta Resources to exit partially. Companies sometimes need to comply with regulatory requirements or maintain a certain level of public float. Selling a stake could help meet these obligations.

Institutional investors or active shareholders may have encouraged Vedanta Resources to unlock value by selling part of their stake. It is to be noted that these are speculative reasons, and the actual motivations may vary.