Dollar bonds of the Indian mining company Vedanta Resources Ltd. jumped as their liquidity could increase as the company plans to sell its international zinc operations to a subsidiary of Hindustan Zinc Ltd. for $2.98 billion.
Vedanta Resources bonds climbed on Friday. The company’s 2026 debt recovery bonds jumped 7.8 cents on the dollar to 77.6 cents.
Hindustan Zinc will buy the assets of THL Zinc Ltd in stages. THL units include Black Mountain Mining (Pty) Ltd. in South Africa and Skorpion Zinc (Pty) Ltd. in Namibia.
The sale will help Vedanta owner Agarwala mitigate Vedanta Resources’ debt following an unsuccessful attempt to delist Vedanta Ltd. in 2020.
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London-based Vedanta Resources has $4.7 billion in dollar bonds that the issuer must repay over 4 years, of which $900 million in the first half of 2023.
This deal is quite beneficial for Vedanta Resources and shareholders not directly involved in the management, as it will help move cash out of the unit and secure profits at higher valuations. At the same time, the restructuring helps to avoid long-term capital gains tax. If cash is used for payouts, it will provide the necessary cash flow relief.
Shares of Vedanta Ltd. rose 3% and shares of Hindustan Zinc fell 9.9%.
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