Vedanta raises $100 million via 'tap' issue

Vedanta Resources, the London Stock Exchange-listed metals and mining group, has raised another $100 million on Thursday, through a "tap" issue to fund its increased capital investment and general purpose expenses.

This issue has the same maturity date of February 2010 and other terms as Vedanta's December 2004 issue of $500 million.

The cost of funds raised in yesterday's tranche is about 10 basis points lower than the December issue, reflecting the yield in the secondary market, investment banking sources said.

The $100 million has been raised at a cost of 265 basis points over Libor or 305 basis points over US treasuries. The cost of the December issue was Libor-plus 275 basis points or US treasuries plus 316 basis points.

The five-year swap rate for six-month Libor was 4.13 per cent on Thursday and equivalent US treasury rate was 3.73 per cent. One basis point is one-hundredth of one per cent. The issue was lead arranged by Deutsche Bank and Barclays.

A tap issue an issue where the funds raised get added to the previous issue expanding the total size of the offering. The maturity and other term of the tap issue remain the same as the first one.

The sources said Vedanta had not foreseen the requirement for additional resources when it hit the market December 2004 for its first overseas borrowing in 2004-05. The tap issue also helped meet the unsatisfied demand of investors during the December issue.

"The investor demand was strong. They had got less than what they wanted in December 2004," they said.