Vedanta Resources Secures $1.25 Billion Loan Amid Credit Downgrade by S&P Global

• ByStartupStory     |    December 15, 2023

UK-headquartered Vedanta Resources Ltd, the parent company of Vedanta Group, has successfully obtained a $1.25 billion loan from private credit lenders. The funding aims to refinance and repay a portion of the $3.2 billion debt maturing in 2024 and 2025. Despite this move, S&P Global downgraded Vedanta Resources’ ratings from ‘CCC’ to ‘CC’ due to concerns related to potential bond extensions, placing the company on the CreditWatch Negative list.

In a statement, Vedanta Resources highlighted that the fundraising is essential for creating a long-term sustainable capital structure, demonstrating its ability to access global capital markets, and reinforcing investor confidence in the underlying business. The company did not disclose the names of the lenders but specified that the loans were secured from reputable financial institutions to refinance existing liabilities.

Simultaneously, Vedanta Resources is in the process of seeking consent from existing bondholders to extend debt maturity, amend certain covenants, and secure waivers to enhance the credit package of bonds maturing in 2024. However, S&P Global remains unimpressed, viewing the liability management exercise as a distressed transaction under their criteria.

S&P Global stated, “The successful completion of a liability management exercise initiated by Vedanta Resources Ltd to extend the maturities of three of its US dollar-denominated bonds will constitute a distressed exchange under our criteria.” The rating agency warned of rising risks of a conventional payment default if the company does not proceed with the proposed transaction.

Vedanta Resources plans to address the three bond maturities using a combination of cash and new bonds. The company will exchange about half of the January 2024 bond with new bonds maturing in January 2027 and most of the August 2024 and March 2025 bonds with new amortizing bonds maturing in December 2028.

The $1.25 billion credit facility, aimed at refinancing existing liabilities, will mature in April 2026 and is guaranteed by Vedanta Resources and its subsidiaries. S&P Global expressed concerns about the transaction, highlighting the private credit facility’s priority access to brand fee payments from subsidiary Vedanta Ltd, which represents a significant portion of Vedanta Resources’ cash flow.

Vedanta Resources, led by billionaire Anil Agarwal, had earlier announced its intention to refinance $3.8 billion worth of bonds maturing between 2024 and 2026. The company faces upcoming bond maturities of about $1 billion in January 2024, a similar amount in August 2024, $1.2 billion in March 2025, and $600 million in April 2026.

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