US$3bn multi-step liability management transforms credit profile of Vedanta Resources Plc

Company profile

Vedanta Resources Plc is a London listed and sixth largest diversified resources company in the world. Vedanta produces aluminium, copper, zinc, lead, silver, iron ore, oil and gas and commercial energy. It has operations in India, Zambia, Namibia, South Africa, Ireland and Australia.

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The Challenge

Emerging from a bleak macro-economic backdrop and a global cyclical downturn in commodities in 2016, and a year where it also saw rating downgrades from both its rating agencies, Vedanta Resources Plc undertook a comprehensive sequence of proactive liability management measures in 2017.

The solution

In 2017, Vedanta Resources Plc conducted a comprehensive suite of multi-step liability management transactions, aggregating approximately US$3bn. This comprised a combination of Reg S/144A new bond issuance, synchronised with tender offers and make-whole redemption of near-term maturing outstanding bonds as well as new bilateral and syndicated term loans from a group of banks.

1. In January 2017, Vedanta Resources Plc issued a US$1bn five and a half year 6.375% bond, in sync with two ‘any-and-all’ tender offers for its outstanding 2018 and 2019 bonds, with an aggregate outstanding amount of US$1.95bn.
2. In May 2017, it redeemed all outstanding US$379m 9.5% notes due in 2018 with cash by exercising the make-whole option.
3. In August 2017, a second US$1bn bond was issued with seven-year maturity and 6.125% coupon. This was concurrent with two ‘any-and-all’ tender offers for 2019 and 2021 bonds, aggregate outstanding US$1.675bn.
4. In parallel, US$840m bank refinancing was launched comprising a new US$575m syndicated term loan and US$265m bilateral loans, all with final maturity of five years. Subsequently, a further US$100m bilateral loan was put in place.

The said liability management transactions were for Vedanta Resources Plc’s debt of approximately US$6bn. All new and refinanced debt facilities were senior unsecured obligations.

As Arun Kumar, Group CFO recalls, “Our objective was to materially transform the credit profile of the company through a combination of deleveraging, extending average maturity and optimising the blended cost of borrowings. The timing and the steps were chosen to benefit from positive momentum in the natural resources sector, the company’s good operating results and credit rating upgrades, at the same time create value for our bond holders who benefit from the strong India linkages the company has.”