Vedanta demerger: Key lenders signal green light after months of deliberation

livemint.com:

Vedanta Ltd has decided to endorse the demerger of the group’s flagship, ending a nearly seven-month deadlock, confirmed two persons directly aware of the development. The delay had been over the proposed allocation of $7 billion worth of debt owed to Vedanta's creditors in India, including State Bank of India and Bank of Baroda.

“We feel (the demerger) will reduce burden, benefit the company, creditors and other stakeholders," said the first person cited above. “It will also enhance the headroom to leverage, if required, for each of the demerged verticals and speed up the group’s renewed growth plans." Once the final approval for the demerger–one of the biggest in the listed space–is granted, Vedanta's group companies may seek fresh lines of credit from their current creditors to obtain growth capital for each vertical, the first person added.

Apart from SBI and BoB, Vedanta's lenders include Punjab National Bank, Union Bank of India, Axis Bank, ICICI Bank, and IDBI Bank. Vedanta’s creditors in India have appointed SBI Capital Markets to assess issues such as distribution of debt and the possible impact on lenders following the demerger.

Over the past year, debt has been the central point of all key business decisions for the London-headquartered metals, mining and energy conglomerate Vedanta Resources, the parent of Mumbai-headquartered Vedanta Ltd. The proposed demerger, although aimed at enhancing margins and transparency, is expected to stem concerns arising from debts that may stifle the group’s ability to grow.

Vedanta’s bankers now seem to be seeing “merit in the proposal" to split the company into six separate listed entities, the two persons said. “So far, two large private sector banks have accorded their