Bondholders of Vedanta parent seek higher rates for rollovers

Mumbai: Vedanta Resources (VRL) bondholders are demanding higher coupons for bonds to be rolled over as the group is paying higher coupons for fresh funds, said people familiar with the matter. VRL is the London-based parent company for Indian-listed resources conglomerate Vedanta Ltd.

Fresh borrowing coupons by Vedanta have become the benchmark as they are offering close to 17-18%, higher than the 14% for rollovers.

The major concerns of bondholders include raising new loans at high rates, plans to prepay existing bonds, a consent fee offer, and restructured bonds with capex restrictions, leading to potential credit rating issues and long-term financial challenges.


The restructured bonds are expected to carry an interest rate of 14%, which bondholders believe is low, especially when they are borrowing afresh from Standard Chartered and JP Morgan at 17%.

Bondholders have expressed concerns over the increase in the interest repayments going forward. "Should the restructuring move forward, Vedanta Resources' interest costs could significantly increase from $150-160 million per quarter to $280-300 million per quarter," a bondholder said. "This will increase interest expenses for the company to $1 billion annually, which will have to be serviced by the company."

Potential Capex Curbs
Also, the restructured bonds are set to come with significant capex restrictions, creating concerns about the limitations this might impose on Vedanta's growth and expansion, the bondholder added.

Vedanta is looking to use the new loan of around $1 billion to prepay a portion of its existing debt, targeting 55% of the $1 billion 13.875% 2024 bonds, 5% of the $ 950 million 6.125% August 2024 bonds, and 20% of $ 1.2 billion 8.95% March 2025 bonds.