Fri 12/04/2020 01:19 AM
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Relevant Documents:
Preliminary Offering Circular
Tender Offer Memorandum

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Vedanta Resources Ltd.’s any and all tender offer for its outstanding due 2021 notes is conditional on successfully obtaining funds from its new USD bond by Vedanta Resources Finance II Plc, which is guaranteed by the parent and by subsidiary guarantors Twin Star Holdings Ltd. and Welter Trading Ltd, according to a roadshow presentation seen by Reorg.

Vedanta Resources further notes in the presentation that it is “exploring several strategic initiatives for consolidation and simplification of the group structure.” As reported, various buyside and sellside sources flagged the possibility of Vedanta Resources increasing its stake in Vedanta Limited to 75%, from the existing 50.13% levels, following the failed attempt to privatise the Indian listed company.

The new bond carries an incurrence covenant for attributable leverage of the subsidiary guarantors to not exceed 6.0x, stepping down to 5.5x from Sept. 30, 2021 onwards, the presentation states attributable gross leverage for the subsidiary guarantors as of Sept. 30, 2020 is 5.65x (pro forma for the current bond issuance, assuming a bond size of $670 million), the presentation states.

Vedanta Resources has debt maturities aggregating $67 million in the financial year ending March 2021, and $1.147 billion debt maturing in the financial year ending March 2022, according to the presentation.

The subsidiary guarantors have $645 million of debt maturing in FY21 and $408 million maturing in FY22. The FY21 maturities comprise a $120 million revolving credit facility, and a $425 million facility, which the presentation states was repaid post Sept. 30, 2020.

The combined debt maturing at VRL and at subsidiary guarantors as of FY21 is recorded at $712 million, while in FY22 the debt maturing is $1.555 billion, the presentation shows.

The presentation details the repayment schedule of the $956 million intercompany loan extended by Vedanta Ltd.’s overseas subsidiary Cairn India Holdings Ltd to Vedanta Resources Ltd, which has an average life of 2.2 years and pays 7% interest. The repayment schedule is as follows:

  • $207 million due June 2021

  • $300 million June 2022

  • $300 million due June 2023

  • $149 million due Dec. 2023

Key terms of the new bond as detailed in the presentation are as follows:

Issuer: Vedanta Resources Finance II Plc
Guarantors: Vedanta Resources Ltd. (Parent Guarantor, Vedanta or the company), Twin Star Holdings Ltd., Welter Trading Ltd. (subsidiary guarantors)
Offering: USD Guaranteed Notes
Size: USD benchmark
Distribution: Rule 144a/ RegS
Expected Issue Rating: B- (S&P)
Use of Proceeds: Primarily to fund the tender offer for Vedanta Resources outstanding 8.25% bonds due 2021 including accrued interest (current outstanding is $670 million), and any remaining proceeds shall be used to service debt of the guarantors and/or for acquisition of equity shares of Indian subsidiary/(ies) of Vedanta by subsidiary guarantors, if decided and in accordance with applicable law.
Listing: Singapore Exchange Securities Trading Ltd. (SGX-ST)
Governing law: English law
JGCs, JLMs, JBRs: Barclays, Citi, Credit Suisse, DBS Bank, Deutsche Bank, JPMorgan, Standard Chartered Bank

A summary of the terms of the tender offer, taken from the presentation, are as follows:

Purpose: To proactively manage Vedanta’s upcoming debt maturities and extend its debt maturity profile.
Target Bonds: Outstanding 8.25% bonds due 2021 (current outstanding amount is $670 million) (2021 notes).
Tender offer consideration: Purchase price till early tender deadline - $1000 per $1000. Purchase price post early tender deadline till expiration time - $980 per $1000. In addition to payment on the relevant purchase price, the company will also pay the accrued and unpaid interest on each of the 2021 notes accepted for the purchase up to, but excluding, the early payment date, if any, or the final payment date.
Structure: Any and all tender offer
Conditions: Acceptance of validity tendered 2021 bonds will be subject to successful completion of a concurrent debt financing, company has the option of cancelling the tender offer in case debt financing is not raised or the amount raised is not sufficient.
Joint Deal Managers: Barclays, Citigroup, Credit Suisse, DBS Bank Ltd, Deutsche Bank, J.P.Morgan and Standard Chartered Bank.
Information and Tender Agent: Morrow Sodali, Contact:
Governing Law: English Law
Early tender deadline: Dec. 17, 2020
Early acceptance date: Any time after the early tender deadline if the company elects to exercise the early purchase option
Early payment date: promptly following the Early Tender Deadline, expected to be Dec 22, 2020, if the company elects to exercise the early purchase option
Expiration time: Jan. 4, 2021
Final acceptance date: Any time after the Expiration Time
Final payment date: Promptly following the Expiration Time, expected to be Jan. 6, 2021

According to the presentation, as of Sept. 30, Vedanta has $4.8 billion of cash at its operating companies. The presentation outlines the following deleveraging plan:

  • Terming out maturities of short-term debt at various entities including Vedanta Ltd.;

  • Focus on managing interest expense to preserve free cash flow for deleveraging;

  • $4.8 billion of cash at operating companies as on Sept. 30 and incremental cash flows; and

  • Strategic initiatives for consolidation and simplification of group structure as mentioned above.

The corporate structure of Vedanta Resources according to the preliminary offering circular is as follows:

--Dipika Lalwani, Nidhi Pandurangi
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