Home >Markets >Stock Markets >Vedanta Resources passes key funding test with sale of bond

Mining giant Vedanta Resources Ltd. was able to secure much-needed funds by selling $1 billion of notes at one of the highest yields for a dollar bond in Asia this year.

The company priced the January 2024 bond on Wednesday at a yield of 13.875%, according to a person familiar with the matter, who asked not to be identified because they aren’t authorized to speak about it. Vedanta Resources plans to use the money to finance a buyback offer for $670 million of notes maturing in June 2021.

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Vedanta Resources “managed to price a larger offering than expected, albeit at a high yield," Trung Nguyen, senior credit analyst at Lucror Analytics Pte., wrote in an investor note. Importantly, the deal showed the company can access debt capital markets, as there was doubt about that given high yields on outstanding notes, he wrote.

Strains have been increasing at the company, which is controlled by billionaire Anil Agarwal, after its attempt to delist Indian unit Vedanta Ltd. failed in October. The planned delisting would have given the parent easier access to cash there. Moody’s Investors Service lowered Vedanta Resources’s credit rating further into junk territory earlier this month, citing “persistently weak liquidity and high refinancing needs."

The bond sale only partly allays debt concerns about the company, which faces about $650 million of bank loan repayments by March 2021, Vishal Kulkarni, an analyst at Nomura International HK Ltd, wrote in a note. Vedanta Resources also has a $1 billion bond due July 2022.

Pricing on the note sold Wednesday tightened from initial guidance of about 14.5%. In the terms of this week’s sale, the company also agreed to conditions that include debt limits at subsidiary guarantors of the note, Twin Star Holdings Ltd. and Welter Trading Ltd.

Those entities, which hold a combined stake of about 38% in Vedanta Resources’s Indian unit, can’t allow their debt to exceed $3.1 billion, according to a termsheet seen by Bloomberg. The debt cap will change proportionately with any rise or fall in the stake. Additionally, Twin Star and Welter can’t sell or transfer their holding in the Indian unit, the terms showed.

Vedanta Resources’ latest bond received more than $1.9 billion of bids, with asset managers taking up most of it. About 57% of the total orders were placed from Asia Pacific.

Barclays Plc, Citigroup Inc., Credit Suisse Group AG, DBS Bank Ltd., Deutsche Bank AG, JPMorgan Chase & Co. and Standard Chartered Plc managed the deal.

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