InvestorQ : Why has Vedanta raised $1.2 billion in the global bond market and where do they plan to use these funds?
Dhwani Mehta made post

Why has Vedanta raised $1.2 billion in the global bond market and where do they plan to use these funds?

Dilmini Mercia answered.
1 year ago

Vedanta Resources of UK has raised $1.2 billion through a bond offering with a coupon rate of 8.95% and maturing after 4 years in March 2025. The bonds have been guaranteed with respect to principal and interest payments by Vedanta Resources and two of its wholly-owned indirect subsidiaries viz. Twin Star Holdings and Welter Trading.

Vedanta will use the proceeds of the bonds for acquisition of equity shares of its Indian subsidiary as well as for servicing its existing debt. This is part of the larger plan of Vedanta Resources to buy around 37.17 crore shares or 10% of the capital of Vedanta Ltd at Rs.160 per share. The buyback amount will be worth $814 million and is the first step towards delisting the Indian operations of Vedanta, which it had already tried earlier.

Against the issue size of $1.2 billion, Vedanta received offers from more than 150 potential investors worth $2.6 billion. This is the largest oversubscription in recent times in any dollar bond offering. In terms of geographical mix of potential investors, the biggest 50% chunk came from Asia Pacific region followed by 30% from EMEA and the balance from North America. The original plan was to raise $1 billion, which was upsized based on the demand.

Vedanta had originally tried to buy back the shares of its India unit at Rs.87.50/share but that had fallen through as it was done at the bottom of the commodity cycle and at the peak of the pandemic. Obviously, it did not get the required response. Post the proposal falling through, the Agarwal group had enhanced its stake from 50.14% to 55.04% via block deals.

Vedanta plans to undertake this delisting in order to simplify the group structure and to streamline the process of servicing the Group's financing obligations. It was also likely to improve the credit metrics and above all give them access to the entire dividend pay outs of cash rich companies like Hindustan Zinc.