Shares of Vedanta Ltd would be in focus on Thursday after its parent Vedanta Resources (VRL) reportedly arrived at the formula for its bond restructuring after consultations with several bondholders and showed confidence on the bond recast that are coming up for redemption.
An ad hoc group holding two guaranteed bonds of VRL reportedly advised investors to reject the proposed bond restructuring as outlined in the consent solicitation released on December 13, ET reported. As per the ET report, the ad hoc group includes holders of $1 billion 13.875 per cent bonds due in January 2024, $1.2 billion 8.95 per cent bonds due in March 2025 and two other bonds.
VRL requires to achieve a two-thirds quorum for the bondholder vote, and within that, they need two-thirds approval to proceed with the restructuring. VRL said the advice by an ad hoc group holding guaranteed bonds to reject the proposed bond restructuring may not succeed, the ET reported.
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To recall, Vedanta Resources' decision to consider debt recast recently led S&P Global Ratings to downgrade its long-term issuer credit rating and long-term issue ratings on the company's bonds due January 2024, August 2024, and March 2025 to 'CC' from 'CCC'. This is because S&P Global felt that a successful completion of a liability management exercise initiated by the Anil Agarwal-led company to extend the maturities of three of its US dollar-denominated bonds would constitute a distressed exchange.
As part of the exercise, the Vedanta Resources intends to address the three bond maturities using a mix of cash and new bonds. Accordingly, it would exchange about half of the January 2024 bond with new bonds maturing in January 2027, and most of the August 2024 and March 2025 bonds with new amortizing bonds maturing in December 2028.
"The likelihood of a conventional default in the absence of the transaction is high. This is because of the company's large upcoming debt maturities and weakened access to both internal cash flow and external financing. The company has about $4.5 billion in debt maturities through March 2025. We do not consider the new terms of the proposed transaction as constituting adequate compensation to offset the lengthened maturities and new terms that are different from the original promise," it said.
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