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 per cent, 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.

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. (Bloomberg)

Ameya Karve