CreditSights has recommended bondholders to approve London-headquartered Vedanta Resources’ (VRL) plans to extend the maturity date of its $3.15 billion dollar bonds, as they are “now more attractive”. However, the rating agency is cautious about the tight timelines as failure to get approvals could lead to a default.
“Investors can pick up an additional 200 bp compensation if consents are provided by the early consent date, which is December 27, 2023,” CreditSight said in a note, suggesting bondholders should provide their consents for the amendments as the terms are now more attractive.
The higher coupon costs offered on the August 2024 and March 2025 bonds could lead to an additional $133 million interest outgo for the company; while it currently looks manageable, VRL certainly faces a higher interest cost burden in the long-term, it added.
However, the rating agency is cautious about the tight timelines since it does not give much wiggle room, as a potential adjourned bondholder meeting could be held on January 18, 2024. This is just a couple of days ahead of the January 2024 bond due date of January 21.
“A failure to get approval on the restructuring or any delays could lead to a default, as the Use of Proceeds (UOP) for the $1.25 billion facility is for the restructuring’s upfront cash payment. If the consent does not go through, Vedanta is not free to apply it to the $1 billion January 24 bond payment,” it added.
Last week, VRL had sought investors’ approval to extend the maturity date of its $3.15 billion dollar bonds – due in January 2024, August 2024 and March 2025 – by four years. The company, helmed by billionaire Anil Agarwal, also secured a $1.25 billion new funding to repay part of the debt. It also offered to pay $779 million in February for notes due in 2024 and 2025.
Following the move, rating agency Standard and Poor’s downgraded VRL long-term issue ratings of bonds to ‘CC’ from ‘CCC’.