Billionaire Anil Agarwal’s debt-strapped Vedanta Group took out a new loan for about $850 million, its latest effort to come up with funds. The Indian mining company inked a five-year deal with JPMorgan Chase & Co. and Oaktree, according to people familiar with the matter, who asked not to be named because the matter is private. Investors have a close eye on the group’s debt load, as surging interest rates intensify pressure on junk-rated borrowers. The transaction takes place just days before Vedanta Resources Ltd. must pay back a $500 million bond.
The loan, with a tenor of 5 years, is expected to provide Vedanta with crucial financial support as it addresses its debt obligations and strengthens its financial position. The company aims to utilize this raised capital to address its imminent debt repayment obligations, alleviating its debt burden. The exact terms and conditions of the loan agreement, including interest rates and repayment schedules, have not been disclosed.
In a strategic move, Vedanta has also announced the declaration of its first interim dividend for the current financial year. The company has declared a dividend of Rs 18.5 per share, amounting to a total distribution of Rs 6,877 crore to its esteemed investors. As Vedanta Resources holds a 68 percent stake in Vedanta Limited, the parent company is set to receive a dividend of Rs 4,683 crore, which is equivalent to the value of the bonds maturing this month.
Record dividends:
Vedanta Ltd. paid dividends five times in the financial year that ended in March, boosting total disbursements to about 377 billion rupees. Its unit Hindustan Zinc Ltd. paid four dividends totaling about 319 billion rupees during the period, according to Bloomberg calculations.
“Reduced cash holdings at subsidiaries could negatively impact future dividends payments,” said Mary Ellen Olson, senior credit analyst at Bloomberg Intelligence. The portion of the payments that Vedanta Resources gets is in line with its stake, which is currently 68.1% at Vedanta Ltd., she said.
Share performance:
Vedanta Ltd. late last month pledged 1.91% of its equity holding in Hindustan Zinc to raise 11 billion rupees. That means that 94.29% of Vedanta’s total share capital is now listed as collateral. The group has released some shares that were used as collateral though. Vedanta Resources repaid $800 million worth of loans, allowing it to free up some shares of its unit Vedanta Ltd. that were used to secure the debt.
Commodity Prices:
Disappointing economic data recently from China suggest that demand for commodities may not pick up much for now in the top metal-consuming nation. That would be bad news for Vedanta, which operates in key commodity markets including aluminum, zinc, copper, oil and gas, and iron ore. The company has said that its future debt-repaying ability would also depend on the prices of these raw materials. Vedanta Ltd. reported a 68% plunge in profits for the January-March quarter from a year earlier.
