Vedanta Aims To Raise $6 Billion-$7 Billion Via Loans-Sources

Aug. 31, 2010 - Vedanta Resources PLC is looking to raise between $6 billion and $7 billion through a mix of long-term and bridge loans to help fund the metals company's deal to buy a majority stake in Cairn India Ltd., four people familiar with the matter said Tuesday.
The London-listed company plans to raise the funds through a special company backed by Vedanta Resources guarantee, the people told Dow Jones Newswires on condition of anonymity.
Vedanta Resources plans to spend as much as $9.6 billion to buy up to a 60% stake in the Indian unit of Cairn Energy PLC.
It is seeking to borrow "as much as possible" directly through a long-term loan, rather than funding the entire amount through a bridge loan that is typically used for financing acquisitions, they added.
"They are likely to end up with a 40:60 or a 50:50 split between long-term and one-year bridge financing," one of the people said.
The company is seeking to raise the bridge loan at a spread of around 250 basis points above the London Interbank Offered Rate, but tepid demand for the company's credit may force rates higher, two of the people said.
The funding deal will be one of the largest dollar-denominated loans this year in the Asia Pacific region excluding Japan, according to Dealogic data. Bharti Airtel Ltd. had taken a $7.5 billion loan to help fund its buyout of Mobile Telecommunications Co.'s assets in several African countries, but that was priced well below the price Vedanta is seeking on its bridge loan despite being for longer-term debt.
The Bharti loan was arranged in March at a total cost of 195 basis points over Libor with an average maturity of 4.75 years.
In fact, bankers said while raising the funds may not be difficult for Vedanta, the pricing may be under pressure as environmental roadblocks to the group's bauxite mining plans in India threaten to hurt the company's profile.
Earlier this month, India's federal government rejected Vedanta's proposal to mine the Niyamgiri Hills for bauxite citing likely environmental impact, setting back the company's plans to ramp up aluminum production.
"It's not the easiest sell in the world, with all the bad press the group has been attracting, and the financial implications for the group," an investment banker said on condition of anonymity.
A Vedanta spokesman wasn't available for comment.