Vedanta Resources hires Cantor Fitzgerald to raise $2 billion to service debt

Vedanta Resources, London-listed parent of Mumbai-based Vedanta Ltd, has appointed US financial services firm Cantor Fitzgerald to syndicate loans to raise up to $2 billion to service its short-term debt maturities, people in the know told ET.

Apart from a clutch of global banks that have long-standing business relations with the billionaire Anil Agarwal-led mining and natural resources conglomerate, several large global credit funds too have joined the talks to potentially fund the transaction, they said.

New York-headquartered Cantor Fitzgerald offers a host of financial services including placement of high yield and distressed debt for its clients worldwide. A syndicated loan is offered by a group of lenders to a large borrower.

“Currently discussions are hinged on the cost of funds, which is veering on the higher side,” a senior banker involved in the negotiations said. “The pricing expectation in the market is somewhere between mid-to-high teens and the company is yet to take a final call on this,” he added.

Requests for comment to Vedanta Resources and Cantor Fitzgerald remained unanswered until press time on Wednesday.

Vedanta needs to service about $2 billion (Rs 16,510 crore) of debt between April and June this year, S&P had said in a recent report. While Vedanta Resources will be able to secure about $1.5 billion through dividends from its subsidiaries including Vedanta Ltd, it will need to raise at least $500 million more to meet the debt obligation, the rating agency noted.

The fundraise also assumes importance as the second avenue of a significant capital infusion for Vedanta Resources – sale of zinc assets by Vedanta Ltd to subsidiary Hindustan Zinc Ltd (HZL) – has run into uncertainty.

ET had reported on February 7, citing people aware of the matter, that the government has raised objections to Vedanta Resources’ proposal to sell its international zinc assets for nearly $3 billion to Hindustan Zinc. Valuation of the assets is said to be among several concerns flagged by the government, which holds a 29.54% stake in HZL that was privatised more than two decades ago.

To be sure, Vedanta will be able to service these debt obligations from its balance sheet for now even if it fails to secure any funding, analysts at S&P noted. However, in the absence of external funding, the company will face a liquidity crunch beyond September.

“In the absence of a significant fund raising, Vedanta Resources will be left with very little cash, of about $500 million, following the repayments,” S&P said in a report. “This will make external funding critical for debt maturities after September.”

These include $500 million of loan repayments in the quarter ending December 2023, and a $1 billion bond in January 2024.

The proposed fundraise comes at a time when funding in the global debt market has become expensive as liquidity has dried up. Vedanta Resources’ credit rating was downgraded by one notch by Moody’s in November on concerns over the company’s ability to refinance $900 million bond facilities maturing between January and March. Vedanta disputed the rating action and later terminated Moody’s services.

People in the know said the company was unlikely to get a superior rating from Fitch either.

Meanwhile, S&P – the only Big 3 rating agency servicing Vedanta Resources – has said its rating may come under pressure if the ongoing fundraise doesn’t go through in the coming few weeks.