Vedanta Resources Bonds Rise After Cairn Merger Deal Sweetened

  • Higher odds Cairn India shareholders will agree to terms: MUFG
  • Vedanta bonds due 2021 set for biggest gain since March 31

Vedanta Resources Plc’s 2021 notes are set for their biggest gain in more than three months after its India-listed mining subsidiary sweetened the terms of a merger with Cairn India Ltd.

Vedanta Resources’s $900 million 8.25 percent bonds maturing 2021 bonds rose by 4.8 cents on Monday, set for the biggest increase since March 31. Its $1.2 billion 6 percent notes maturing 2019 gained by 2.4 cents, poised for the sharpest rise since June 20. There’s now a “markedly higher” prospect of Cairn India’s minority shareholders agreeing to the merger, MUFG Securities said in a research note on Monday.

A merger would mean that Vedanta Resources bondholders would have better access to Cairn India’s cash pile that totaled 234 billion rupees ($3.5 billion), according to the latter’s latest financials. Under the sweetened merger terms, Cairn India’s minority shareholders will receive one Vedanta Ltd. share and four redeemable preference shares for every one Cairn India stock, compared with one share and one redeemable preference share under the original deal a year ago.

“Refinancing has been a concern for Vedanta bondholders as there is limited cash at the issuer level but a large portion of the debt is raised there,” said Nicholas Yap, a credit strategist at MUFG Securities Asia. “Merging Vedanta Ltd. with Cairn India will enable better access to the latter’s cash pile, potentially reducing refinancing risks over the medium-term.”

Vedanta Resources owns a majority stake in Vedanta Ltd., which in turns owns a stake in Cairn India.

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