Vedanta to raise $775 m via convertible bonds

London-listed Vedanta Resources, controlled by billionaire Anil Agarwal, will be offering convertible bonds worth $775 million (about Rs 3500 crore) to refinance its loans at easier interest rates.

The bonds, with a maturity period of seven years, will have a coupon rate of 3.5-4% and a conversion premium of 35-40%.
Vedanta, in a statement said the money will be used to refinance debt redemptions and for other general corporate purposes.

“Priority in allocation of the bonds will be given to the existing shareholders,” the statement said. Volcan Investments, Anil Agarwal’s investment company, has indicated that it will not participate in the deal.

Sale managers JPMorgan Cazenove and Morgan Stanley have an option to buy another $75 million of convertible bonds, pushing the issue size to as much as $850 million if fully exercised.

Vedanta intends to complete the transaction by March 30. Vedanta had in July last year  raised $1.5 billion through an ADS issue to fund expansion, acquisitions and increased stakes in subsidiaries.

Sterlite Industries, a subsidiary of Vedanta, in October last year raised $500 million through notes that were convertible into American depositary shares, to fund its Tuticorin expansion project. Notes offered by Sterlite have a maturity date of October 30, 2014, and carry an interest rate of 4% per annum.

The company said, “Vedanta has recently redeemed $1,146 million of bond debt from existing cash resources, including $546 million of its $725 million 4.60% convertible bonds due 2026 and $600 million of its 6.625% bonds due 2010”.

Vedanta, fell 4.1% in London trading to 2,532 pence at 8 pm IST. The stock has gained 384% in the past 12 months, according to data compiled by Bloomberg.

Vedanta is rated Ba1, a level below investment grade, by Moody’s Investors Service, and a step lower at BB by Standard & Poor’s. The company has about $3.2 billion of its total $5.5 billion bonds and loans coming due through 2014, data compiled by Bloomberg show.