London: India-focused miner Vedanta Resources plans to raise up to $1.5 billion through a private bond offering to help pay for its planned $9.6 billion acquisition of oil and gas firm Cairn India.
Vedanta, which will become a fully-fledged diversified miner once it secures a slice of India’s oil reserves, said the proceeds from the dollar-denominated bond would be used to repay a bridge loan, part of the purchase price, as well as fees and expenses related to the long-delayed Cairn deal.
If the deal does not go ahead, the miner said it would use the cash to “fund capital expenditure, repay debt and for other general corporate purposes”.
UK group Cairn agreed in August 2010 to sell a majority stake in Cairn India to Vedanta, but the deal has been delayed due to a dispute over royalty payments.
A panel of ministers is expected to meet on 27 May to consider the sale. On Thursday Cairn and Vedanta extended a 20 May deadline for the troubled deal.
Vedanta will start a series of investor meetings on Monday to market the bond across Asia, Europe and the United States.
It has hired Barclays Capital, Citigroup, Credit Suisse, Royal Bank of Scotland and Standard Chartered Bank as joint global coordinators.
It has also appointed Goldman Sachs International and Morgan Stanley as joint bookrunners and UniCredit as co-manager.
Standard & Poor’s, who have assigned a speculative-grade BB rating to the bond, said the company intends to issue two new bonds with different maturities.
S&P said Vedanta’s operating risk would increase after the Cairn deal because the new line of business would offset benefits from diversifying its sources of revenue.
“We expect Vedanta’s financial risk profile to weaken following the acquisition, but the company will be able to maintain its consolidated leverage and cash-flow protection measures at levels acceptable for the current rating,” S&P said.
Moody’s has assigned a Ba2 rating to the bonds