New Delhi: London-based Vedanta Resources Limited (VRL), the parent firm of Mumbai-listed mining conglomerate Vedanta Ltd, has secured a term loan facility of up to USD 600 million that will be used to refinance a high-cost private credit facility, according to a communication sent to bondholders.
The first tranche of USD 380 million has been committed, with the remaining USD 220 million expected to be finalised shortly with other participating banks.
Lenders for the USD 380 million facility comprise a consortium of Gulf, Japanese, and European banks, including First Abu Dhabi Bank, Mashreq, Sumitomo Mitsui Banking Corp, and Standard Chartered.
"The facility carries a door-to-door tenor of over four years, with an average maturity of approximately three years and a pricing of SOFR (Secured Overnight Financing Rate) plus 450 basis points.
"This proactive refinancing, combined with internal cash flows, positions us to fully repay the PCF facility - substantially enhancing our credit profile by increasing average debt maturity beyond four years and reducing our overall cost of debt to single digits," said the communication to bondholders.
With savings of over 900 basis points in the interest costs for the USD 550 million refinancing, this will result in total annual interest savings of around USD 50 million for the company.
In its communication, VRL said, "This transaction reflects the continued confidence of global financial institutions in Vedanta's credit quality and strategic vision. It underscores our commitment to prudent capital management, proactive refinancing, strengthened financial flexibility, and long-term value creation." VRL is also looking for a credit rating upgrade to BB levels on the back of its proactive refinancing and improving financial and operational performance.
In the medium term, the company plans to achieve an Investment Grade rating supported by its robust earnings, healthy free cash flows, ongoing growth projects, strengthened balance sheet and deleveraging plans.
An investment-grade credit rating signifies a company's strong capacity to meet its financial obligations and is considered a safe investment for institutional investors. It also allows a company to borrow money at lower interest rates, attracting a broader range of investors and gaining easier access to global debt markets.
The refinancing is part of VRL's efforts to manage its debt profile as it seeks to optimise cost and extend maturities.
As of March, VRL's debt hit a decadal low of USD 4.9 billion, as the company deleveraged its balance sheet by over USD 4 billion in the last three years.
The group continues to focus on deleveraging and bringing down its cost of finance, stating in a recent earnings call that in FY25 its group-level debt reduced by USD 1.2 billion, of which USD 0.7 billion was at VRL and the rest USD 0.5 billion was at its Indian listed subsidiary, Vedanta Limited.
The Indian conglomerate said in its recent earnings call that the company and its parent entity "now maintain a stronger leverage position (net debt to EBITDA ratio) than most of their key global peers".
Over the past few quarters, VRL has refinanced its entire USD 3.1 billion bonds, which has helped the company flatten its maturity curve and extend the maturity to more than eight years, reducing VRL's cash requirement and average coupon rate by 250 bps.
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