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

Billionaire Anil Agarwal’s Vedanta Group has widened its net for borrowings to credit funds such as Farallon Capital, Davidson Kempner and Ares SSG Capital to meet more than $1 billion in upcoming repayments, said people familiar with the matter. This comes as banks are talking tough on a $1 billion loan to the mines and minerals giant amid a tightening credit market, they said.

The pricing being offered by the banks is 300 basis points above the expected rate, they said. 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 to lower their asking rate. The loan – talks with banks started a month back – was expected to be raised at the secured overnight financing rate or SOFR+500 bps. The lenders have given a term sheet at SOFR+800 bps for the 3-3.5-year loan, said the people cited above. SOFR is currently at 4.55%.

Vedanta has been exploring ways to raise funds to meet upcoming maturities after the government opposed the Hindustan Zinc (HZL) board’s move to buy THL Zinc Ventures in a $2.98 billion cash deal.

Repayments in next quarter
THL Zinc Ventures is Vedanta’s global zinc business. HZL is a Vedanta unit, having been privatised over two decades ago. The government retains a 29.54% stake in HZL.

JP Morgan, Barclays, Deutsche Bank, Standard Chartered Bank and Davidson Kempner declined to comment. Vedanta, Ares SSG, Farallon Capital spokespersons did not respond to queries.

“VRL continues to be in talks with private funds to raise $750 million to $1 billion,” said one of the persons cited above, adding that negotiations have been going on for about three months. “The funds are currently offering debt at 16-17% and the company is looking to borrow at a lower rate.”VRL is looking to raise the $750 million to $1 billion under the “Oaktree box” to refinance the facility. VRL had borrowed $1 billion from Oaktree Capital Management by creating an encumbrance on 17% stake in VDL held by three subsidiaries – Finsider International, Westglobe Ltd and Vedanta Holdings Mauritius II. VRL had borrowed money from Oaktree at 13.875% and used the funds for increasing its stake in India-listed VDL since December 2020.

VRL has large repayments in the next quarter, including US dollar bonds of $400 million in April and $500 million in May. It has another $1 billion bond maturing in January 2024. Apart from the bond maturities, VRL has $1.1 billion term debt and $600 million interest payments and $450 million inter-company loans. It has been servicing debt through loans and dividends from operating companies like VDL and Hindustan Zinc Limited (HZL).