SBI, BoB are mandated lead arrangers for $1 bn Vedanta issue

Though the London Stock Exchange (LSE) listed company has indicated the loan proceeds will be deployed for general corporate purposes, the funds are likely to be used to refinance the credit availed for acquiring a majority stake in Sesa Goa, banking sources said.

Vedanta had acquired 51 per cent stake in Sesa Goa in August last year for over $980 million. Bankers said that the debt will have a 57 month tenure and may be priced 2.90-3.10 per cent above London Interbank Offered Rate (Libor).

The bankers said these two state-owned Indian banks are stepping up their participation in loan syndication activity to grow their presence in the global financial market. It helps to garner fee-based income which is part of the plan to increase the share of earnings from fees and commissions, a bank executive said.

Besides being arrangers, bankers have also given underwriting commitments for the funding. Other global banks working as mandatory lease arrangers for Vedanta include Barclays Capital, Standard Chartered, WestLB and Caylon.

Bankers said the commitment level of Indian banks towards big-ticket deals is small due to constraints on their balance sheet size.

But with experience and strong client relationships with domestic companies that are spreading their presence overseas, their portfolio of loans extended for mergers and acquisitions has grown substantially in the last three years.

Last week,Sterlite Industries, a subsidiary of Vedanta Resources, signed an agreement with ASARCO, a Tucson-based mining, smelting and refining company, to acquire all its operating assets for $2.6 billion in cash. However, it is not known if Sterlite has souded banks to raise funds to refinance the acquisition in America.