Vedanta plans to raise up to $1 billion from credit funds

Anil Agarwal, Vedanta Resources Chairman

With more than $1 billion in repayments coming up, billionaire Anil Agarwal-led Vedanta Group has widened its net for borrowings to credit funds such as Farallon Capital, Davidson Kempner, and Ares SSG Capital.

As the credit market tightens, banks are talking tough about a $1 billion loan to the mines and minerals giant, the Economic Times reported sources as saying. The banks are offering 300 basis points higher than what the company expects, they said.

To lower its asking rate, THL Zinc Ventures, a wholly owned subsidiary of India-listed Vedanta Ltd (VDL), is negotiating with global lenders including JP Morgan, Barclays, Standard Chartered Bank and Deutsche Bank.

Talks with banks began a month ago, and the loan was expected to be raised at the secured overnight financing rate plus 500 basis points, the report said.

Lenders have provided a term sheet for the three- and three-and-a-half-year loan at SOFR+800 bps. Currently, SOFR stands at 4.55 percent, according to the report.

A term sheet is a non-binding agreement that lays out the terms and conditions of a possible business agreement.

Moneycontrol could not independently verify the report.

Vedanta is exploring ways to raise funds for upcoming maturities after the government opposed Hindustan Zinc board's plans to buy THL Zinc Ventures for $2.98 billion.

A string of repayments lined up

Vedanta's global zinc business is THL Zinc Ventures. Having been privatised over two decades ago, HZL is a Vedanta unit. The government hold a 29.54 percent stake in HZL.

Davidson Kempner, JP Morgan, Barclay's, Deutsche Bank, Standard Chartered Bank, and Barclays declined to comment.

"VRL continues to be in talks with private funds to raise $750 million to $1 billion," the ET report quotes a source as saying, adding that negotiations were on for about three months. "The funds are currently offering debt at 16-17 percent, and the company is looking to borrow at a lower rate."

To refinance the facility, VRL is looking to raise $750 million to $1 billion under the “Oaktree box”. VRL borrowed $1 billion from Oaktree Capital Management by encumbering a 17 percent stake in VDL owned by Finsider International, Westglobe Ltd, and Vedanta Holdings Mauritius II subsidiaries, the report said.

Since December 2020, VRL has increased its stake in India-listed VDL by borrowing money from Oaktree at 13.875 percent, the report added.

VRL has to repay US dollar bonds worth $400 million in April and $500 million in May. In January 2024, another bond worth $1 billion will mature.

VRL also has $1.1 billion in term debt, $600 million in interest payments, and $450 million in intercompany loans. HZL and VDL have loaned it money and given it dividends to service its debt, according to the report.