Vedanta Buys Back Debt as 38% Yield Shows Market Shut to Miners

Industry:    January, 2016

Billionaire Anil Agarwal’s Vedanta Resources Plc is seeking to buy back debt at a discount to chip away at a $2.9 billion maturity wall in 2016, as the bond market shuns mining companies amid a commodity rout. India’s biggest producer of aluminum and zinc offered to repurchase $500 million of its $1.13 billion of convertible bonds due in July 2016 via an auction that closes on Jan. 18, according to its tender offer document. The lowest bidders will have the best chance of repayment. Vedanta’s 2018 conventional note is trading at 57 cents on the dollar for a 37.6 percent yield. The offer adds to debt buybacks and asset sales by mining groups and trading houses including Glencore Plc and PT Indika Energy as the five-year slide in commodity prices shows no signs of ending. London-listed Vedanta relies on three quarters of its operating profit from zinc and oil, which fell this week to their lowest levels in six and 12 years, respectively. “Bond prices at these levels show us that there is no trust for the company, so refinancing could be a problem in the future,” said Jens Zimmermann, who manages $275 million at Volksbank Pforzheim EG near Frankfurt and who intends to tender some of its holding. “A lot of mining companies have the same problem but the most of them are not able to make such an offer. This tender will help the bonds.”