Vedanta Resources to raise $1.25 bn through foreign investors at high rates

London-based Vedanta Resources (VRL) is on the verge of securing a private loan amounting to $1.25 billion from various international investors, according to a report by The Financial Express (FE). This loan is strategically timed ahead of its $1 billion debt maturity in January 2024. The debt, anticipated to be finalised in the coming week, is expected to be raised at higher interest rates compared to existing ones.

In ongoing discussions, Vedanta is negotiating with New York's Cerberus Capital Management for a $300 million loan, Davidson Kempner Capital Management, and Varde Partners for $200 million each, and Ares SSG, an alternative investment firm, for approximately $100-150 million. Additional talks involve Edelweiss Alternative, BlackRock, and others. Sources close to the matter suggest that the loans, offered at an 18 per cent interest rate for three years, are set to be disbursed in January.

While foreign debt typically carries interest rates ranging from 10-12 per cent, Vedanta's move to secure funds at a higher interest rate reflects the urgency to address its upcoming debt obligations, according to the FE report. The funding, secured against VRL's shares, is crucial to avert potential default, especially considering the looming $1 billion debt maturity in January 2024 and an additional $1 billion due in August 2024, along with debt obligations of $3.1 billion in FY25.

On Wednesday, Hindustan Zinc, owned by Vedanta Ltd announced that it will give an interim dividend of Rs 6 per equity share for 2022-23, as earlier reported by Business Standard. The dividend, amounting to Rs 2,535.19 crore, will contribute Rs 1,645 crore to Vedanta in lieu of its 64.92 per cent stake in HZL.

Last month CEO Arun Mishra also expressed optimism that the company would deliver a stable performance in the coming quarters. The company, he said, is ideally placed to harness the strong demand and emerging growth opportunities led by the Indian growth story.