11th Apr 2016 13:46
LONDON (Alliance News) - Vedanta Resources PLC on Monday said its lenders have agreed to change its debt covenants that will give the multi-commodity giant more time as it continues to battle lower commodity prices across its vast portfolio.
Vedanta's lenders have agreed to grant the request made by the company to change its lending terms from the end of March 2016, when its financial year ends, until the end of September 2018 to ensure Vedanta can comply with its covenants.
Vedanta has been addressing its debt lately, repurchasing USD550.0 million of convertible bonds back in January and February before the company repurchased a further USD200.0 million of convertible bonds and USD148.6 million of other bonds that are due in the 2017 financial year at the end of March.
Vedanta said the balance of its debt maturities for the 2017 financial year amount to USD1.50 billion, which will be mainly paid using the funds it is expecting to receive from its subsidiary, Vedanta Ltd, for an intercompany loan made by the PLC.
The subsidiary owes USD1.80 billion to London-listed Vedanta, but the subsidiary is not expected to repay that in full. Vedanta did not state how much of that loan will be repaid by the subsidiary.
However, one of its Vedanta Ltd's subsidiaries, Hindustan Zinc, has also declared it will pay a USD1.50 billion special dividend, of which around USD1.00 billion is set to flow through to Vedanta Ltd. That, plus "other funds", will be used to repay some of the loan owed to the PLC, allowing the PLC in turn to pay its debt maturities.
Vedanta has managed to secure that agreement with its lenders at a time when its multi-commodity portfolio is being hit by falls in prices. Vedanta said it is currently reviewing the carrying value of its assets, mainly in its oil and gas division, which may lead to some impairments being booked in the recently ended financial year.
Operationally, Vedanta remains strong. The majority of its commodity portfolio experienced a rise in production, with its zinc operations outside of India and its oil and gas division being the only units to experience falls in the year.
The multi-commodity group said average working interest production of oil and gas in the financial year to the end of March fell 3% to 128,191 barrels of oil equivalent per day from 132,663 barrels of oil per day in the previous year.
From its Zinc India operations, production of refined zinc rose 3% in the year to 759,000 tonnes from 734,000 tonnes, refined lead production rose 14% to 145,000 tonnes from 127,000 tonnes and silver production was up a hefty 30% to 13.7 million ounces from 10.5 million ounces.
Vedanta's zinc operations outside of India, however, produced 27% less zinc in the year, totalling 226,000 tonnes from 312,000 tonnes a year ago.
Copper cathode production in India rose 6% to 384,000 tonnes from 362,000 tonnes, whilst copper production from Zambia rose 8% to 182,000 tonnes from 169,000 tonnes.
Aluminium production was up 5% in the year to 923,000 tonnes from 877,000 tonnes, and Vedanta's power generation unit reported a 23% rise in total power sales during the year.
"We are continuing to optimise production across our portfolio to generate maximum value in a low commodity price environment and remaining focussed on reducing costs to protect margins. These strong operational results reinforce the quality of our assets, our operational capability and resilience to weak markets. We also remain committed to pro-actively manage our balance sheet in these weak markets," said Chief Executive Tom Albanese.
Vedanta shares were trading up 2.4% to 360.00 pence per share on Monday afternoon.
By Joshua Warner; [email protected]; @JoshAlliance
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