Photo of Ajay Jain, Standard Chartered, Debopama Sen, Citi and Mark Troutman, DBS collect the award on behalf of Vedanta Resources Plc.
This is a multi-step liability transformation of the company’s credit profile comprising approximately US$3bn. The company’s objective was to materially transform the credit profile of the issuer by a combination of deleveraging, extending average maturity and optimising the blended cost of borrowings. Careful sequencing, being issuanceready, timing the transactions with good market conditions and company’s results delivery, were key success factors. This has also helped communicate Vedanta’s credit story to existing and new investors.
Rashmi Mohanty
Head – Group Treasury
Gurgaon, India
Vedanta Resources Plc is a London listed and sixth largest diversified resources company in the world. Vedanta produces aluminium, copper, zinc, lead, silver, iron ore, oil and gas and commercial energy. It has operations in India, Zambia, Namibia, South Africa, Ireland and Australia.
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US$3bn multi-step liability management transforms credit profile of Vedanta Resources Plc
The challenge
Emerging from a bleak macro-economic backdrop and a global cyclical downturn in commodities in 2016, and a year where it also saw rating downgrades from both its rating agencies, Vedanta Resources Plc undertook a comprehensive sequence of proactive liability management measures in 2017.
The solution
In 2017, Vedanta Resources Plc conducted a comprehensive suite of multi-step liability management transactions, aggregating approximately US$3bn. This comprised a combination of Reg S/144A new bond issuance, synchronised with tender offers and make-whole redemption of near-term maturing outstanding bonds as well as new bilateral and syndicated term loans from a group of banks.
- In January 2017, Vedanta Resources Plc issued a US$1bn five and a half year 6.375% bond, in sync with two ‘any-and-all’ tender offers for its outstanding 2018 and 2019 bonds, with an aggregate outstanding amount of US$1.95bn.
- In May 2017, it redeemed all outstanding US$379m 9.5% notes due in 2018 with cash by exercising the make-whole option.
- In August 2017, a second US$1bn bond was issued with seven-year maturity and 6.125% coupon. This was concurrent with two ‘any-and-all’ tender offers for 2019 and 2021 bonds, aggregate outstanding US$1.675bn.
- In parallel, US$840m bank refinancing was launched comprising a new US$575m syndicated term loan and US$265m bilateral loans, all with final maturity of five years. Subsequently, a further US$100m bilateral loan was put in place.
The said liability management transactions were for Vedanta Resources Plc’s debt of approximately US$6bn. All new and refinanced debt facilities were senior unsecured obligations.
As Arun Kumar, Group CFO recalls, “Our objective was to materially transform the credit profile of the company through a combination of deleveraging, extending average maturity and optimising the blended cost of borrowings. The timing and the steps were chosen to benefit from positive momentum in the natural resources sector, the company’s good operating results and credit rating upgrades, at the same time create value for our bond holders who benefit from the strong India linkages the company has.”
Best practice and innovation
The January 2017 bond deal was the first tender offer by an Indian issuer in accordance with amended guidelines permitting shortened offer periods. This transaction marks the return to capital markets for Vedanta Resources Plc after a gap of more than three and a half years and is the first bond offering for Vedanta Resources Plc since May 2013.
The final order book of January 2017 bond issue closed at over US$2.3bn across over 200 accounts with an over subscription of ~2.3x. On the back of robust investor demand, Vedanta Resources Plc was able to print the bond at 6.375%.
The final order book of August 2017 bond issue closed at over US$1.7bn across over 290 accounts with an over subscription of ~1.7x. In both these bond deals, the bookrunners were able to garner strong interest of high quality Asian, American and European accounts.
The careful sequencing, being issuance-ready, timing the transactions with good market conditions and company’s results delivery, were the key success factors for Vedanta Resources Plc.
The success of these transactions has also helped communicate Vedanta Resources Plc’s credit story to existing and new investors.
Key benefits
- Extended average debt maturity.
- Reduced blended cost of debt.
- Tightened yield curve from 7.1% in December 2016 to 4.7% in September 2017.
- Unique structure delivered.
- Credit rating upgraded by both S&P and Moody’s.
As Kumar concludes, “It was all about being proactive and we have emerged stronger.”
