Vedanta Resources will use the $1.7 billion (Rs 9,500 crore) it has raised through bonds to partly repay the debt taken for its Cairn India acquisition.
"Vedanta Resources Plc announced the pricing of the offering of bonds in the aggregate principal amount of $1. 7 billion," the company, led by industrialist Anil Agarwal, said in a statement on Thursday, adding, this represents one of the largest corporate high yield bond issuances out of Asia ex-Japan.
"Vedanta intends to use the proceeds of the offering to refinance a portion of its obligations under its existing 2010 term loan facility (that was entered into to partly finance Vedanta's acquisition of a controlling stake in Cairn India), which will result in a cancellation of Vedanta's commitments under a bridge facility, and to pay related fees and expenses and for general corporate purposes," it said.
This is a landmark transaction for Vedanta, the natural resources giant said, adding that it is the fourth successful bond transaction.
The company said: "The bonds are being offered and sold in two tranches, consisting of $1.2 billion aggregate principal amount of 6% bonds due January 2019 and $500 million aggregate principal amount of 7.125% bonds due May, 2023."
The bonds are being offered and sold in a private offering to qualified institutional buyers outside the United States and the offering is expected to close on June 3, 2013, subject to customary closing conditions.
"This transaction demonstrates the financial strength and global recognition of Vedanta Group as a major natural resources corporate. It is our fourth bond transaction and each time we have been met with increasingly overwhelming response by investors," said Anil Agarwal, chairman of Vedanta Resources.
Vedanta said this is the largest ever bond offering by any Indian corporate and a high yield Asian issuer and the "lowest coupon in the long 5 year tranche for an Indian high yield issuer in the G3 debt markets" besides being "one of the largest order-book size for an Indian issuer - in excess of $10 billion."
Bank of America Merrill Lynch, Barclays, Citigroup, J P Morgan, The Royal Bank of Scotland and Standard Chartered Bank are acting as joint global coordinators, joint lead managers and joint bookrunners and Deutsche Bank are acting as joint bookrunners for the issue.
The bonds, the company said, are expected on the closing date to be rated "Ba3" by Moody's, "BB" by S&P and "BB" by Fitch.
The company, with most of its operations in India, had reported a 21% increase in its core profits at $4.888 billion for the year ended March, 2013.
While declaring annual results earlier this month, Vedanta had announced launching of a private bond offering to qualified institutional buyers and said money from the proceeds will be used for re-financing a portion of the term loan taken to part-finance Cairn India acquisition.
Global rating agency Standard & Poor's had removed it last week from negative credit watch saying that the London-listed firm's re-financing risk has reduced after securing funds.
Removal from negative credit watch means that the risk of Vedanta's rating downgrade by S&P has reduced in immediate future. The rating agency had put Vedanta on negative credit watch in April citing slow progress made by the company in re-financing the $1.35 billion debts, maturing in June.
Vedanta has said it has refinanced, rolled over and repaid most of the maturing debt ($3.6 billion) for the current fiscal. This includes debts maturing in June, for which the company has tied up funds through bank loans and bonds.
The company has managed to reduce its net debt by $1.5 billion in the last fiscal to $8.615 billion. In FY'12, the company's net debt was $10.064 billion.