However, VRL needs the approval of at least two-thirds of the bondholders for this plan to proceed.
Initial feedback from investors in Singapore and Hong Kong reveals discomfort with the proposed restructuring, raising the possibility of opposition from a group of bond investors, two bondholder sources said.
“A group of bondholders could oppose the proposed restructuring, setting the stage for a potential showdown,” a source said. “VRL needs to achieve a 2/3rd quorum for the bondholder vote, and within that quorum, they need a 2/3rd approval rate to proceed with the restructuring.”
Despite this, bond prices have displayed signs of recovery in recent days, with January 2024 bonds quoted at 91/92, up from a low of 87 the previous week. Similarly, August 24 bonds, previously at a low of 62, were quoted at 65/66 on Friday.
“Vedanta leadership has been meeting and are in discussions with bondholders as part of a regular non-deal roadshow to meet its stakeholders,” a Vedanta Spokesperson said.
Vedanta Resources is actively engaging with investors, with senior executives, including Omar Davis, president of strategy, conducting meetings in London. The company had previously discussed the potential extension of bonds maturing in 2024 and 2025 during meetings in Hong Kong and Singapore.
As of the end of June 2023, Vedanta Resources Ltd’s total aggregated holdco debt amounted to $5.9 billion, with $3.7 billion in bonds. S&P Global Ratings has issued a warning that changes in Vedanta Resources’ financial strategy regarding debt transactions could lead to a potential downgrade in its credit rating.
A group of bondholders, primarily Oaktree Capital Management and Avenue Capital, has appointed London-based Cleary Gottlieb Steen & Hamilton LLP as their legal advisor, as reported by ET on September 22. Vedanta Resources has also entered discussions with global private credit funds, including Cerberus Capital, Bain Capital, Ares SSG Capital, and Davidson Kempner, to collaborate on a $1 billion short-term loan intended to partially cover the repayment of $3.2 billion in bonds maturing in 2024 and 2025, as reported by ET on September 21.
Vedanta Resources is exploring various options to meet its financial obligations and prevent defaults, including considering a partial bond exchange with upfront payments.
The proposed extension of bond maturities, part of Vedanta Resources’ liability management exercise, aims to delay maturity dates until 2027. The company faces upcoming debt obligations, including a $1 billion bond due in January 2024, a $950 million bond due in August 2024, and a $1.2 billion bond maturing in March 2025, in addition to various loan repayments. Furthermore, there is an intercompany loan of $449 million due to Vedanta Limited by December 2024.
In a separate development, Vedanta India is exploring the issuance of bonds to raise approximately Rs 2,500 crore. The company currently holds a credit rating of AA from domestic rating agencies.