Vedanta Resources raises $1.1 billion through dual-tranche bond issuance

Mining mogul Anil Agarwal's Vedanta Resources has raised $1.1 billion through a new bond offering to prepay existing liabilities, the company said in a Singapore exchange filing.

Vedanta Resources Finance II plc, a wholly owned subsidiary of Vedanta Resources, raised $1.1 billion through a new dual tranche issuance in international debt capital markets.

Vedanta Resources Ltd (VRL) has raised $3.1 billion in USD bonds since September 2024.

As per the exchange filing, the latest bond issuance consists of two tranches, a $550 million tranche of 5.5 year tenor at a 9.475% interest rate and a $550 million tranche of 8.25 years tenor at a 9.850% interest rate.

Both tranches garnered strong investor demand with the bonds receiving final orders of $3.4 billion from over 135 accounts, representing an oversubscription of 3.1x, the company said.

"The net proceeds from the offering of the Bonds will be used to prepay Vedanta's outstanding bonds (including any accrued interest thereto), pay any related transaction costs in connection thereto, and to service other debts," it said.

Marquee investors from the United States, EMEA (Europe, the Middle East and Africa) and Asia were amongst the major investors.

Bonds are expected to be rated 'B' by S&P Global and 'B2' by Moody's Ratings. Moody's recently upgraded VRL corporate family rating (CFR) to B1 from B2 on the back of recent moves.

The final bonds allocation included 61% from Asia, 30% from EMEA, and 9% from the US for the 5.5-Year Tranche and 54% from Asia, 30% from EMEA, and 16% from the US for the 8.25-Year Tranche.

Ajay Goel, the company’s Chief Financial Officer, said, "The latest transaction marks the complete refinancing of Vedanta's restructured bonds. The strong interest in the series of transactions reflects significant investor confidence in the several strategic steps that Vedanta has taken over the last several quarters in terms of delivering record production, cost rationalisation and deleveraging."

VRL has refinanced $3.1 billion in US dollar bonds since September 2024 through four successive international bond transactions. The total quantum of USD bonds raised by Vedanta marks the largest amount raised by an Indian issuer since 2022.

CreditSights in a note said VRL is likely to use the proceeds to refinance its bonds worth $600 million having maturity in April 2026 and papers worth $460 million maturing in December 2028. "The refinancing of the 13.875% high-coupon December 2028 will be prioritised, with residual proceeds allotted for the April 2026 repayment."

Two major agencies, Moody's and S&P Global, recently upgraded VRL's and its instruments' ratings citing recent developments. On January 13, Moody's said it upgraded VRL's corporate family rating to B1 from B2 and that on the senior unsecured bonds guaranteed by VRL to B2 from B3, a one-notch upgrade, while maintaining a stable outlook. Moody's has assigned a B2 rating to VRL's proposed senior unsecured bond issuance.

"The bond issuances in quick succession solidify Vedanta's access to capital markets and demonstrate increasing investor confidence in the company. The recent transactions underscore management's proactive approach to liability management, which positively impacts our assessment of Vedanta's governance scores" Nidhi Dhruv, Moody's Ratings Vice President and Senior Credit Officer, said.

S&P Global too assigned a preliminary rating of 'B' on VRL's senior unsecured notes on January 13. This is a one-notch upgrade from the current one. It has placed the rating on credit watch positive.