Vedanta Resources prioritising private credit facility, says S&P Global

Vedanta Resources is prioritising cash flows from future asset sales and brand fees from Vedanta Ltd to meet obligations of its latest private credit facility, rather than for all creditors, analysts with S&P Global said on Friday.

On December 13, Vedanta Resources proposed a new liability management exercise for three of its dollar-denominated bonds, totalling $3.8 billion.

The company proposed meeting these obligations through a mix of cash (upfront payment of $1.25 Billion) and new bonds.

S&P, in a call on Friday, noted that the partial upfront payment is funded by an amortising private credit facility of $1.25 billion. An email query sent to Vedanta Resources did not receive any response.

Analysts with S&P on the call noted that the liability management exercise is not as straightforward as seen in this region or globally.

They noted, “Our key consideration is that bondholders are being subordinated to the private credit facility from a cash flow point of view.”

S&P, in its presentation, noted that the private credit facility has priority over brand fee payments from Vedanta Ltd and the cash flow from future asset sales at Vedanta Ltd until $750 million of the facility has been repaid.

The analysts further noted that the brand fee payment from Vedanta Ltd — as a proportion of Vedanta Resources’ standalone cash flow — is estimated at 40-50 per cent. This “will not be available to bondholders,” the analyst noted.  

Similarly, they noted, “Cash flows from asset sales (at Vedanta) will be prioritised to the private credit facility, and not all creditors.”

The conglomerate had earlier revealed plans to sell Vedanta Ltd iron ore and steel assets.