Mumbai: Vedanta Resources, the London-based parent of India’s Vedanta Ltd, has bought itself breathing room as it received investor consent on Wednesday to delay the maturity of a cumulative $3.2 billion of its outstanding corporate bonds.

The company will meet the bond investors on Thursday, when it will discuss the restructuring plan in greater detail. Vedanta Resources has been locked in a cycle of chasing capital every few months to refinance maturing debt. In the past one year, as liquidity in the global markets evaporated, the company found itself in a tight spot. It had nearly $2 billion of bonds maturing in 2024, including $1 billion this month, even as the flow of dividends from operational subsidiaries in India slowed down. Now, with investors consenting to the company restructuring its outstanding commercial papers, Vedanta has no debt maturities till April 2026. “This just eases off all the pressure on them,” a senior banker said on condition of anonymity. “It basically gives them a glide path to do whatever they need to do in terms of the demerger or all the other activities that they want to do. They have more time to sell assets. They don’t need to do any fire sales,” the banker said. A person aware of the company’s plans said its deleveraging game plan will now involve paying lenders through cash flows and the sale of non-core assets. However, the investor approval also brings a concern for the company. Changing the terms of its commercial papers will likely result in a downgrade of its credit rating. On 14 December, a day after Vedanta had sought investor approval for the restructuring, S&P had put out a note saying the exercise constitutes “a distressed exchange under our criteria,” and had downgraded the company’s rating one notch to ‘CC’ from ‘CCC’. It also said the three bonds whose maturity has been delayed will likely be downgraded to a ‘D’ rating by S&P after investor consent came through. The company’s long-term credit rating could fall to ‘SD’ or selective default from ‘CC’ at present. However, S&P also noted shortly after the downgrade that it expects to raise the ratings “to a level we believe will reflect the liquidity position and capital structure of Vedanta Resources post-transaction.” The suquent rating could be ‘CCC’ or higher, depending on the liquidity position of the company, they noted. Queries sent to S&P analysts and Vedanta remained unanswered till press time. Investors cheered the outcome of the voting, with shares of Vedanta Ltd closing 2.17% higher on Wednesday at 263.65 on BSE, even as the benchmark Sensex shed 0.75% during the session. The company received the necessary quorum of two-thirds of investors for the restructuring proposal for four series bonds on the last day of voting, 2 January. Of those who voted, more than 97% were in favour of the restructuring, as per a statement issued by the company to the exchanges. Only 20-40% votes had come in across the four bonds by Friday. “A lot of activity happened on the last day. A lot of people were woken up and reminded to vote by the banks,” said one person aware of the matter. The company has put on the block its domestic iron ore business, assets in Liberia and its steel unit ESL Steel Ltd. The person cited above said Vedanta has received “competitive” bids from companies looking to unlock synergies with these assets. Last month, Vedanta Resources sought investor approval for a liability management exercise that would involve making a partial upfront payment and then delaying by 29-52 months the maturity of three of its outstanding bond series—those maturing in January 2024, August 2024 and March 2025—with a principal amount of around $3.2 billion. While the coupon rate of the January 2024 bonds remains unchanged at 13.875%, that for the latter two bond series has been increased to 13.875% from 6.125% and 8.95%, respectively. The company also took consent from investors of $600 million bonds maturing in April 2026, although no changes are proposed to their profile. To make the upfront payments for its liability management exercise, Vedanta Resources borrowed $1.25 billion in term debt maturing in April 2026. This will be the company’s first major repayment obligation after the bond restructuring. The capital was raised from a clutch of private credit lenders including Cerberus Capital Management and Davidson Kempner Capital Management. The interest rate of this loan is understood to be around 18%, which is significantly more expensive than the coupon rate of the bonds at 13.875%. Vedanta Livemint tops charts as the fastest growing news website in the world to know more.

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