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Speaker 1: Hello, and welcome to The Credit Edge, a weekly markets podcast.

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Speaker 1: My name is James Crumbie. I'm a senior editor at Bloomberg.

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Speaker 1: This week, we're very pleased to have on the show

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Speaker 1: Kalied Matuur, who covers credit markets for Bloomberg News in

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Speaker 1: New York. How are you cal.

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Speaker 2: I'm doing for a while, Jims, Thanks for having me.

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Speaker 1: We're very excited to get your take on the markets.

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Speaker 1: Thanks very much for joining. We're also delighted to welcome

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Speaker 1: back Mary Ellen Olsen, a credit analyst with Bloomberg Intelligence

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Speaker 1: in Hong Kong. We'll be talking to Mary Ellen a

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Speaker 1: bit later in the show about Vedanta, an Indian company

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Speaker 1: that's been running into trouble with a ton of dollar debt.

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Speaker 1: So do stay with us, But first, Khalid Matuur with

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Speaker 1: Bloomberg News, you've been all over the corporate bond story.

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Speaker 1: This month was the busiest September ever for core for

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Speaker 1: bond sales, with more than one hundred and ten billion

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Speaker 1: dollars sold in the first week. We did expect a

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Speaker 1: bit of a rush. September is always busy as investors'

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Speaker 1: return from vacation with money to spend, and issuers usually

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Speaker 1: look to take advantage of that. But why are they

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Speaker 1: moving so fast now? What's the story?

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Speaker 2: Cal Well? As you put it, James, usually September is

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Speaker 2: a very busy time, busy month for issues. And the

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Speaker 2: reason they're coming now is because if you think about it,

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Speaker 2: if you're a CFO of a company, for instance, you

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Speaker 2: have your borrowing needs for the year, you're looking at

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Speaker 2: the issues calendar, and really after September things really start

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Speaker 2: to slow down. You know, October people are starting to

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Speaker 2: report their earnings and usually around that time companies don't

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Speaker 2: sell debt. So really September is that really good window

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Speaker 2: for you to really take your business.

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Speaker 1: So later in the month, I mean there's going to

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Speaker 1: be some earnings blackouts because the FED coming up. Does

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Speaker 1: that mean that companies have to do it before those

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Speaker 1: things happen?

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Speaker 2: Absolutely, and that's what they've been trying to do. We've

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Speaker 2: seen a lot of big companies, not just in the

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Speaker 2: US but globally really take advantage of this window. You know,

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Speaker 2: last week we saw Philip Morris come to the market.

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Speaker 2: Just this week two Mobile raised two billion. You know,

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Speaker 2: we've seen big banks two come to the market and

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Speaker 2: just there the day we had Bank of America come

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Speaker 2: to the market as well, So it's really everyone coming

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Speaker 2: in and saying, you know what, this is a good

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Speaker 2: and a good window to issue that, and you know,

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Speaker 2: you might as well take care of the opportunity of

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Speaker 2: the opportunity while it's still there.

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Speaker 1: Are these deals mostly raising money for refinancing or for

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Speaker 1: new projects or what are they spending that money.

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Speaker 2: On, right, right, So it's mostly refinancing. And what's really

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Speaker 2: happening here. GM says borrowing costs have gone up quite

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Speaker 2: a bit. If we just step back and look at

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Speaker 2: March last year, just when FED was starting to high

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Speaker 2: rate the borrowing costs, if you look at the yield

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Speaker 2: on an average bond, it was it was around three

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Speaker 2: three three percent, and now just looked at this morning,

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Speaker 2: it's a it's nearly six percent. You're looking at five

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Speaker 2: point eight percent. So borrowing costs are almost doubled here.

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Speaker 2: And so if you're a company, you're thinking you really

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Speaker 2: want to issue deb if you really need to write,

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Speaker 2: and so it really boils down to you know, whether

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Speaker 2: you need to refinance, whether you need to push out maturity,

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Speaker 2: and then for the other reasons, the usually company borrow

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Speaker 2: or you can wait you know, you can really wait

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Speaker 2: until borrowing costs go down and then you have a

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Speaker 2: much better window to issue.

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Speaker 1: So just to be clear, on that yield, you're talking

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Speaker 1: about six percent. That's for investment grade companies.

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Speaker 2: Right, absolutely, that's for you know, what we call investment

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Speaker 2: grade companies, which is really just you know, these safer

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Speaker 2: companies that are less likely to default and so they

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Speaker 2: get us safer higher rating. And so we've seen a

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Speaker 2: lot of those companies come to the market. But also

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Speaker 2: the high yield market has been very, very very active.

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Speaker 2: I was just looking at the Bloomberg data this morning,

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Speaker 2: and we've had seven billion just this week, the last

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Speaker 2: three days actually, and we have another four billion coming

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Speaker 2: in and so we're having I mean, this market has

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Speaker 2: not been this busys in mid May. So that just

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Speaker 2: gives you a picture of like everyone is trying to

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Speaker 2: come and everyone is really trying to take advantage of

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Speaker 2: this window.

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Speaker 1: And the yields on that stuff. I mean I'm looking

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Speaker 1: at it, it's around eight and a half percent or something.

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Speaker 1: And again, you know, like investment grade is doubled over

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Speaker 1: the last year, so it's a lot more expensive. Why

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Speaker 1: are they paying.

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Speaker 2: Up the companies the companies.

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Speaker 1: You mean, yeah, I mean, so if it's so expensive,

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Speaker 1: why don't they just wait it out?

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Speaker 2: I mean, if you need to push out maturities and

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Speaker 2: then gyms, you really don't have any other option, right,

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Speaker 2: you have to really take care of that business. You

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Speaker 2: really have to issue that And going back to what

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Speaker 2: I was saying earlier, this companies are being very, very

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Speaker 2: very strategic about their borrowing plans, right, you really need

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Speaker 2: to come to the market when if you really need to,

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Speaker 2: you know, if you go down to high yield. You know,

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Speaker 2: we're starting to see the LBO market open up a

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Speaker 2: little bit. We're starting to see you know, more deals

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Speaker 2: come to the market, and so they're issuing for a different.

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Speaker 1: Reason on So just on the refinancing side, I mean,

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Speaker 1: we have talked a lot about there is a kind

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Speaker 1: of a wall of maturities approaching investment grade and high

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Speaker 1: yield companies. You know that it really does get quite

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Speaker 1: high in say twenty twenty five, twenty twenty six, So

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Speaker 1: this a lot of decisues. What you're saying is that

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Speaker 1: they are using this money to pay down some of

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Speaker 1: that maturity to sort of iron out that hump.

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Speaker 2: Absolutely, I mean I have to say, this company is

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Speaker 2: for the most but a lot of companies did a

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Speaker 2: good job pushing out maturities, right. You know, we had

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Speaker 2: this long period of easy, easy monetary policies and rids

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Speaker 2: were quite low, and a lot of companies took advantage

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Speaker 2: of that and pushed out their maturity walls. But still

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Speaker 2: their companies that still need to do this, and those

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Speaker 2: are the companies that we're seeing come to the market now.

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Speaker 1: The deals that we're seeing, are they going well in

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Speaker 1: terms of demand? Are we seeing investors really keen to

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Speaker 1: snap this debt up?

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Speaker 2: Right? So if I can focus a bit and just

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Speaker 2: look at IG for a minute here, kid, you know,

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Speaker 2: it's you know, the demand there is quite strong. It's

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Speaker 2: really quite strong. A good example that comes to mind.

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Speaker 2: We had this utility company, Sierra Pacific come to the

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Speaker 2: market yesterday, JYMS. This company was looking to raise four

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Speaker 2: hundred million, right, and because it was issuing on the

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Speaker 2: longer end of things, so this bonce mature entire years,

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Speaker 2: it got a huge, huge demand. We're talking about three

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Speaker 2: point four billion for a four hundred million deal. So

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Speaker 2: that just tells you how much investors are looking for

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Speaker 2: these bonds, and especially the longer deted bonds because that's

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Speaker 2: where the yield.

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Speaker 1: Is, so the long end. You mentioned that that's interesting.

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Speaker 1: What are we seeing in terms of issuans. There are

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Speaker 1: companies locking in these high rates for the long term

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Speaker 1: right now.

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Speaker 2: It's actually quite the opposite on the most part. So

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Speaker 2: because because rates have gone up so much and borrowing costs,

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Speaker 2: you know, are high, a lot of companies are choosing

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Speaker 2: to issue bonds that mature and relatively very short periods

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Speaker 2: of time. So we're talking two years, we're talking three years,

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Speaker 2: five years, some ten years. But you know, if you

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Speaker 2: just look at the deals that have come to the

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Speaker 2: market from last week, a lot of these deals are

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Speaker 2: shorter dated bonds. Now. Investors, on the other hand, are

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Speaker 2: looking for longer dated bonds, right you know, people are

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Speaker 2: just becoming more optimistic that the Fed is cutting rates

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Speaker 2: and the economy. You know, people expected, you know, a

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Speaker 2: very hard recession here and now we are starting to

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Speaker 2: talk about our soft landing. Some people have been talking

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Speaker 2: about we might not have a recession, right and so

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Speaker 2: for investors, they're becoming more optimistic about the outlook and

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Speaker 2: for them, longer debatd bondes are becoming more attractive, and

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Speaker 2: so they're looking for a lot more of these longer,

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Speaker 2: deaded bones.

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Speaker 1: So from an issue perspective, are they sitting there thinking, well,

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Speaker 1: hang on a minute, we don't want a lot these

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Speaker 1: high rates in for a long time, and we think

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Speaker 1: they're going to come down, so it's going to become

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Speaker 1: cheaper for us to issue at some point Soon's.

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Speaker 2: That's exactly what's happening. You know, in my report, I've

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Speaker 2: talked to CFOs, I've talked to investors, and that's really

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Speaker 2: the thinking here. If you're a CFO, you're thinking, you know,

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Speaker 2: I'm going to issue two years, three years, you know,

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Speaker 2: hopefully around you know, after twenty four, twenty five, you know,

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Speaker 2: we're probably going to have a totally different landscape here

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Speaker 2: and maybe that would be a good time to go along.

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Speaker 2: So for now, you know, issue short bones and just

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Speaker 2: wait for the third to blink.

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Speaker 1: Because on the one hand, you know this is higher

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Speaker 1: for longer narrative seems to be really taking hope. Typically

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Speaker 1: on the investors side, I mean, they're keen to see

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Speaker 1: these rates stay up. But then with saying that, on

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Speaker 1: the borrower side on from Corporate America, they're not buying it.

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Speaker 1: They're betting against it in some ways.

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Speaker 2: That's what's happening. That's what's happening. It's all of a

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Speaker 2: conundrum if you're an investor, if you're if you're a borrower,

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Speaker 2: you're thinking, well, I don't want to get locked in

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Speaker 2: this really high rates, and so I'm going to issue shot.

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Speaker 2: And then you're looking at the market. There's such a

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Speaker 2: huge demand for the long dated bonds, and so we've

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Speaker 2: started to see a little bit of issuers try to

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Speaker 2: issue long at dated bonds. A good example was the

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Speaker 2: Sierra Pacific I just gave you because there's really demand

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Speaker 2: for it, and you can bring down the price when

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Speaker 2: you're issuing this boonce.

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Speaker 1: Let's talk about the price. So for the market, I mean,

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Speaker 1: whenever there's a lot of supply, it tends to hurt

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Speaker 1: the price. And we're seeing that a little bit on

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Speaker 1: the high yield side right now that there is a

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Speaker 1: lot of issuanes as you said, and the spreads are

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Speaker 1: starting to widen. Now are we saying the same thing

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Speaker 1: an investment grade is you know, there's all this supplies,

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Speaker 1: it's starting to hit the price and it's starting to

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Speaker 1: push spreads wider.

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Speaker 2: We've seen a few cases where deals struggle a little bit,

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Speaker 2: but Jim's for the most part, these deals are doing

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Speaker 2: really well. I mean, a a good indicator to look

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Speaker 2: at it is what we call the new issue concessions,

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Speaker 2: which is really just the extra yield premium that companies

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Speaker 2: paid to sell this bonds. It's really it's really not

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Speaker 2: that bad. You know, year to date, on average, it's

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Speaker 2: about eight points something basis points. You know, if you

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Speaker 2: look at the whole of twenty twenty two, it was

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Speaker 2: I think about thir team basis points. So that just

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Speaker 2: tells you that the demand is there and actually the

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Speaker 2: stills are not doing bad at all.

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Speaker 1: Also interesting in your reporting, I mean you say that,

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Speaker 1: you know, we expect a big September for issuance. We

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Speaker 1: expect let's say, one hundred and twenty billion, which is,

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Speaker 1: you know, a decent amount for a month, but if

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Speaker 1: we look back in history, it's still less than you know,

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Speaker 1: I mean, last year was a bit slow, but it's

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Speaker 1: still less than the average over quite a long period.

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Speaker 1: So you know, essentially, you know, it looks like a

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Speaker 1: big month, but it may not end up being. Then

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Speaker 1: on top of that, we've got all this what we

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Speaker 1: call liability management where bond bonds are taken out by companies,

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Speaker 1: you know, they're buying them back, either in the open

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Speaker 1: market or through tender offers. Let me flip the question then,

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Speaker 1: is there enough to go around? Demand seems to be

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Speaker 1: fairly steady, but supply is dropping. Shouldn't that make spreads

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Speaker 1: even tighter?

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Speaker 2: You would you would think that, you would think that.

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Speaker 2: And to your point, supply is expected to you know,

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Speaker 2: to be low this year just because of what we've

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Speaker 2: talked about. Borrowing costs are just very prohibitive for a

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Speaker 2: lot of issues, and so people expect, you know, supply

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Speaker 2: to sort of underwhelm a little bit here. But spreads

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Speaker 2: are you know, held quite quite quite fairly well, if

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Speaker 2: you think about it. I mean, we saw them like

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Speaker 2: kind of jump a bit in you know, Elia this

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Speaker 2: year when we had the bunking crisis. But they're fairly

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Speaker 2: doing well. They're fairly you know, range bound.

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Speaker 1: So before we talked to Mary ellen Olsen about Asia,

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Speaker 1: tell us cal what else is on your radar. You've

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Speaker 1: also been doing some great work on the ESG debt market,

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Speaker 1: which has suffered a bit of a political backlash in

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Speaker 1: the US. How's that market? Doing this year. Are we

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Speaker 1: seeing a bit of a comeback there?

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Speaker 2: We've seen quite a huge rebound this year, James. I mean,

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Speaker 2: just if we just focus on green bones, which is

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Speaker 2: the largest part of sustainable debt market, you know, it's

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Speaker 2: expected to hit a record this year. I mean, the

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Speaker 2: most we've seen was in twenty twenty one, we had

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Speaker 2: around five hundred and twelve billion. This year we might

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Speaker 2: go past six hundred billion. And so we've seen really

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Speaker 2: quite a huge rebound globally for this kind of bonds.

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Speaker 2: What's interesting, though, is to your point, US is kind

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Speaker 2: of struggling a little bit here. We've seen quite a

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Speaker 2: bit of pushbuck you know, you know a lot of

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Speaker 2: people pushing back just on ESG strategy, you know, and

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Speaker 2: so issues are starting to be more careful, right and

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Speaker 2: so in the US they're issuing less of this once.

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Speaker 2: But for the rest of the world, it's it's a

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Speaker 2: big party.

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Speaker 1: Great stuff. Calp Matua from Bloomberg News, thank you so

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Speaker 1: much for joining us.

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Speaker 2: Thank you.

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Speaker 1: You can read all Kyl's scoops on the Bloomberg Terminal

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Speaker 1: and of course at Bloomberg dot com. Right now. We're

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Speaker 1: delighted to welcome back on the credit edge. Mary Ellen Olsen,

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Speaker 1: who covers commodities for Bloomberg Intelligence based in Hong Kong.

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Speaker 1: How's it going, Mary Ellen? Staying dry over there?

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Speaker 3: Ah, well, it's going well, but I can't say I'm

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Speaker 3: staying dry. It's been raining here for about the past month,

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Speaker 3: I think, and it looks like it's going to continue

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Speaker 3: to reign for the next week. So other than that, yes, good,

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Speaker 3: thanks for having me.

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Speaker 1: Great to see you again. And I know you cover

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Speaker 1: a lot of different countries and companies, but I wanted

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Speaker 1: to focus this time on India in particular a company

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Speaker 1: called Vedanta. It's a junk rated Indian mining company that

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Speaker 1: faces repayment of a record two billion dollars in debt

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Speaker 1: next year. Some of those bonds are trading at distress

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Speaker 1: levels and we've talked about that company quite a few

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Speaker 1: times on this show already. But what's the latest there,

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Speaker 1: Mary Ellen. I mean, you know, a lot of companies

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Speaker 1: have a lot of debt due over the next few years.

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Speaker 1: Why is this one in particular coming under so much

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Speaker 1: pressure right now?

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Speaker 3: I think that this one is different because it has

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Speaker 3: so much debt do in such a short short period

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Speaker 3: of time. So through twenty twenty six, it has about

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Speaker 3: three point eight billion in dollar bonds that will fall

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Speaker 3: due and right now we're looking at the next repayment

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Speaker 3: to happen in January twenty twenty four. So the build

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Speaker 3: up has been you know, how how are they going

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Speaker 3: to make the payment on this one billion dollar of

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Speaker 3: debt that's outstanding, And heading into this week, we actually

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Speaker 3: knew that the company was looking at raising new debt,

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Speaker 3: potentially backed by royalties on brand fees. It was also

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Speaker 3: looking at a potential debt ext extension or a debt

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Speaker 3: restructuring initiative, and it was also holding investor meetings in

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Speaker 3: Hong Kong and Singapore. So today I did wake up

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Speaker 3: to some new news which I was hoping I could

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Speaker 3: fill you in on.

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Speaker 1: So that's great. There is some progress, but I mean

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Speaker 1: since we last talked about them in let's say March,

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Speaker 1: I mean it was quite a long time ago we

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Speaker 1: started talking about Verdane. But how much progress have they

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Speaker 1: actually made?

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Speaker 3: They have made progress. They had some dollar bonds that

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Speaker 3: were due earlier this year which they have repaid, and

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Speaker 3: they've also you know, embarked or continued on an overall

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Speaker 3: debt restriction debt reduction strategy for the holding company. But

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Speaker 3: a lot of those initiatives have only kicked the can

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Speaker 3: really down the road, so they haven't really you know,

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Speaker 3: mounted the overall liquidity or the refinancing hurdles in any

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Speaker 3: one particular action since we last.

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Speaker 1: Spoke and we talked a little bit about debt reduction.

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Speaker 1: But how are they funding that?

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Speaker 3: They Well, they have funded it through a variety of means.

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Speaker 3: Most recently, they initiated a stake sale from their operating company,

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Speaker 3: Vedanta Limited. They sold about a four percent stake and

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Speaker 3: raised five hundred million, and that that occurred in August,

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Speaker 3: and that brought in some money to the coffers, which

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Speaker 3: I think people were looking to to provide liquidity for

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Speaker 3: this upcoming debt payment in January.

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Speaker 1: Okay, so they are getting some relief, but I mean,

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Speaker 1: are they selling off assets that are crucial to their

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Speaker 1: operating Are they selling off the crown jewels at this point?

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Speaker 3: Well, they have said interestingly that the chairman has said

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Speaker 3: that they would be looking at potentially creating some pure

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Speaker 3: play investment silos from some of its divisions, which which

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Speaker 3: could happen through the oil and Gas division, also the

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Speaker 3: aluminum division and potentially some a steel company's sale. But

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Speaker 3: I don't think that those things are necessarily going to

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Speaker 3: be happening very quickly. You know, asset sales do take

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Speaker 3: a while, and these are the at least the aluminum

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Speaker 3: and the oil and Gas division are some of the

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Speaker 3: bigger divisions they account I think for the aluminum division

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Speaker 3: is about fifteen percent of EBDEL while the oil and

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Speaker 3: Gas division is closer to around twenty percent. So they're

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Speaker 3: pretty big companies, and you know, they're in commodity industry

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Speaker 3: and they make money, but it takes a while to

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Speaker 3: sell the asset. So I think that it really did

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Speaker 3: need to look at some other alternatives to bring money

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Speaker 3: in to bridge the liquidity gap, so it could have

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Speaker 3: some breathing room in order to affect these asset sales

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Speaker 3: perhaps later down the road.

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Speaker 1: You mentioned the meeting investors right now, the meeting them

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Speaker 1: we're in Hong Kong, Spole, other parts of Asia. But

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Speaker 1: how do you think the investors will be reacting right

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Speaker 1: now given that the bonds are trading at distress levels.

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Speaker 3: Well, what came out from the news today, and I

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Speaker 3: haven't spoken to any investors who have actually sat in

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Speaker 3: on meetings with the companies, yet they only invited specific

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Speaker 3: investors from what I've heard, But what's come out in

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Speaker 3: the news is a couple of things which I think

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Speaker 3: are interesting to hear. The first one is that they

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Speaker 3: are looking at raising new loans, potentially packed by this

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Speaker 3: bran fee, and they are looking at debt extensions. And

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Speaker 3: they're looking at extending the twenty twenty four and twenty

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Speaker 3: five maturities and that's about three point two of the

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Speaker 3: total debt outstanding of three point eight, so they're looking

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Speaker 3: at a significant debt extension. And they're also looking at

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Speaker 3: some other liability management exercises which could also extend their

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Speaker 3: debt maturity profile and improve their overall liquidity. But the

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Speaker 3: news itself actually did take me by surprise, and let

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Speaker 3: me share with you why. I think in the first case,

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Speaker 3: they had wrapped up the January twenty four bonds potentially

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Speaker 3: in the debt extension, and I think that that will

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Speaker 3: take those note holders by surprise because they were looking towards,

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Speaker 3: you know, hopefully getting some new money into pay to

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Speaker 3: pay them off in January. So that was one of

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Speaker 3: the key takeaways from what the news that came out

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Speaker 3: today and The other major news that or takeaway that

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Speaker 3: I got was that the company actually is looking towards

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Speaker 3: a debt extension. And it's interesting because Venantez always really

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Speaker 3: made it a point that it has never defaulted on

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Speaker 3: its debt. And you know, when you look at when

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Speaker 3: you think of a debt extension, that can actually lead

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Speaker 3: to a selective default designation by the rating agencies. And

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Speaker 3: so this idea that they were doing this extension, and

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Speaker 3: it did surprise me, but it does seem as though

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Speaker 3: it could be a palatable solution for the company.

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Speaker 1: Interesting you mentioned the raising agency. I did want to

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Speaker 1: ask you about that. Man, how are they reacting generally?

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Speaker 1: They are they putting pressure on the on the ratings

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Speaker 1: that they're going to downgrade them.

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Speaker 3: Well, the only SMP rates Vedanta at the moment, and

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Speaker 3: they actually have the company at a B with a

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Speaker 3: negative outlook. And I think that, you know, one of

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Speaker 3: the key things that they're factoring into their credit rating

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Speaker 3: at the moment is the company's commitment to make good

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Speaker 3: on its dead outstanding. And I believe that one of

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Speaker 3: the reasons why this kind of debt extension could be

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Speaker 3: palatable to Vedanta. It could be a solution for them

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Speaker 3: is if they're able to structure the transaction so that

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Speaker 3: that doesn't actually result in a selective default, and that

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Speaker 3: that could be possible if it does a concurrent fundraising

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Speaker 3: as well as structures the transactions so that the existing

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Speaker 3: bondholders get more value out of the new transaction. So

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Speaker 3: I think that's that could be a road that could

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Speaker 3: be interesting for them to pursue. And and you know,

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Speaker 3: so it's kind of a different take on it than

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Speaker 3: what I was thinking previously.

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Speaker 1: Do the raisings really massive of Adentro at this point?

401
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Speaker 3: Not necessarily that the everybody knows that the company is

402
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Speaker 3: under extreme liquidity pressure, of course, but I think to

403
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Speaker 3: one extent, you know, if it does get down to

404
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Speaker 3: an SD again, it goes against this mantra that the

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Speaker 3: company has put forth about making good on its debt repayments.

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Speaker 3: And I think it also could impact its borrowing costs

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Speaker 3: if it were to default or get a lower rating

408
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Speaker 3: than a bus, or its ability to secure long ten

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Speaker 3: or debt. So I think, you know, it does still

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Speaker 3: have an impact, you know, at least if nothing else,

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Speaker 3: for the image on a company.

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Speaker 1: So why is long term capital so important for a

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Speaker 1: company like Vedanta.

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Speaker 3: I think at the moment it's it's important because they're

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Speaker 3: in such an expansion mode. They are trying to you know,

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Speaker 3: continue to expand their capacity and these are expensive, you know,

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Speaker 3: capital intensive projects, which are you know, better financed over

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Speaker 3: a longer period of time than a short period of time.

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Speaker 3: And it also it extends their access to capital to

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Speaker 3: a certain extent too, because if all your capital is

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Speaker 3: bunched up at the front end of your you know,

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Speaker 3: over the next couple of years, it creates some liquidity

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Speaker 3: pressure as they're experiencing now.

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Speaker 1: On the other hand, commodity prices are slipping. How's that

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Speaker 1: affecting the DANCA generally.

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Speaker 3: Well, if you just look at the consensus estimate for

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Speaker 3: Vedanta and coming up for the fiscal twenty four and

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Speaker 3: fiscal twenty five, they actually look okay. Some of the

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Speaker 3: commodity prices, yes, they've come off. They've also had some

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Speaker 3: capacity expansion that could help them out next year. So

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Speaker 3: in general, I think the consensus view is that the

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Speaker 3: actual operating company, which is Vedanta Limited, is actually a

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00:22:18,520 --> 00:22:21,399
Speaker 3: good asset. They have good assets and it has value.

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Speaker 3: But really the issue for the company as a whole

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Speaker 3: is the level of debt that it has and it's

436
00:22:26,520 --> 00:22:27,320
Speaker 3: short term nature.

437
00:22:28,320 --> 00:22:30,560
Speaker 1: So if you had to make a bet right now

438
00:22:30,640 --> 00:22:32,440
Speaker 1: based on what you know, do you think they'll pull through?

439
00:22:34,000 --> 00:22:37,879
Speaker 3: I think that their potential to pull through will definitely

440
00:22:38,520 --> 00:22:43,240
Speaker 3: be improved if they can do this debt extension because

441
00:22:43,280 --> 00:22:47,479
Speaker 3: it will buy them, you know, some time. If they

442
00:22:47,520 --> 00:22:49,960
Speaker 3: extend the maturity of some of the existing bonds by

443
00:22:50,040 --> 00:22:54,560
Speaker 3: three years, they do have time to you know, potentially

444
00:22:54,560 --> 00:22:57,920
Speaker 3: make some asset sales, which could reduce the refinancing risk.

445
00:22:57,960 --> 00:23:01,439
Speaker 3: If they bring in some additional monies, they could lower

446
00:23:01,480 --> 00:23:05,640
Speaker 3: potentially the cost that they're encourring to take on additional debt,

447
00:23:05,640 --> 00:23:09,320
Speaker 3: and it could increase their access to bank capital or

448
00:23:09,320 --> 00:23:13,119
Speaker 3: other forms of fundraising. So I think that on the

449
00:23:13,119 --> 00:23:16,879
Speaker 3: one hand, why the bondholders probably it won't like to

450
00:23:16,920 --> 00:23:20,600
Speaker 3: see an extension. It could be something that could help

451
00:23:20,680 --> 00:23:23,640
Speaker 3: them ultimately create more value down the road.

452
00:23:24,720 --> 00:23:26,919
Speaker 1: But given where the bondes are trading, the bonds are

453
00:23:26,920 --> 00:23:31,119
Speaker 1: trading and distress as we discussed, does that mean, you know,

454
00:23:31,400 --> 00:23:32,880
Speaker 1: if we think that they are going to pull through,

455
00:23:32,880 --> 00:23:34,840
Speaker 1: that they could make it o their opportunities there for

456
00:23:34,880 --> 00:23:35,560
Speaker 1: the brave.

457
00:23:35,640 --> 00:23:38,280
Speaker 3: Yes, I think it's hard at the moment to understand

458
00:23:38,280 --> 00:23:42,560
Speaker 3: what that opportunity is though, because there's not a lot

459
00:23:42,600 --> 00:23:46,119
Speaker 3: of information out there about how any sort of extension

460
00:23:46,680 --> 00:23:53,639
Speaker 3: would work. Essentially, again, to avoid I think going into

461
00:23:53,880 --> 00:23:57,359
Speaker 3: a selective default kind of situation with an extension, they

462
00:23:57,400 --> 00:24:00,800
Speaker 3: have to you know, create some value over the original

463
00:24:00,800 --> 00:24:02,879
Speaker 3: offer to bondholders. So I think that that would have

464
00:24:02,920 --> 00:24:06,000
Speaker 3: to be factored in and would be a consideration when

465
00:24:06,119 --> 00:24:10,359
Speaker 3: bondholders consider the extension. But again the shorter data bondholders

466
00:24:10,920 --> 00:24:13,199
Speaker 3: which are treating at much higher levels in the in

467
00:24:13,280 --> 00:24:16,879
Speaker 3: the late eighties, probably we're looking more towards a more

468
00:24:16,920 --> 00:24:21,000
Speaker 3: immediate payoff from you know, near term fundraising.

469
00:24:22,000 --> 00:24:24,240
Speaker 1: So the next thing to watch is what whether they

470
00:24:24,240 --> 00:24:27,200
Speaker 1: can get this extension done, how the investors reacted, what's

471
00:24:27,240 --> 00:24:30,240
Speaker 1: the calendar look like for Verdanza, what's on your immediate radar?

472
00:24:32,480 --> 00:24:36,640
Speaker 3: Probably the the it will take a couple of months

473
00:24:36,760 --> 00:24:39,520
Speaker 3: to figure out what's going to happen in terms of

474
00:24:39,720 --> 00:24:44,280
Speaker 3: this liability management exercise. Certainly it will need to get

475
00:24:44,320 --> 00:24:51,040
Speaker 3: approval for the extension from from the bondholders, and again

476
00:24:51,080 --> 00:24:53,040
Speaker 3: that you know that will depend on where you are

477
00:24:53,080 --> 00:24:56,520
Speaker 3: in the maturity curve and what you feel about having

478
00:24:57,080 --> 00:25:00,600
Speaker 3: an extended exposure to Vedanta through twenty twent twenty seven,

479
00:25:01,200 --> 00:25:03,320
Speaker 3: and I think that is a relevant point because the

480
00:25:03,359 --> 00:25:06,480
Speaker 3: company in the past has been aggressive. They've been aggressive

481
00:25:06,520 --> 00:25:11,639
Speaker 3: and making new acquisitions, especially debt funded acquisitions, so you

482
00:25:11,680 --> 00:25:14,760
Speaker 3: know that could be an issue for some of the

483
00:25:14,800 --> 00:25:19,920
Speaker 3: existing bondholders. But really the drop dead date is by

484
00:25:19,960 --> 00:25:24,080
Speaker 3: the end of the year to get some more fundraising

485
00:25:24,119 --> 00:25:29,359
Speaker 3: in in order to avert some additional rating pressure from SMP.

486
00:25:30,000 --> 00:25:32,560
Speaker 3: They've asked the company to raise at least six hundred

487
00:25:32,560 --> 00:25:35,680
Speaker 3: million by the end of twenty three and beyond that

488
00:25:35,760 --> 00:25:39,120
Speaker 3: you have the boundary payment for a billion which comes

489
00:25:39,160 --> 00:25:42,480
Speaker 3: in towards the end of January twenty fourth. So those

490
00:25:42,520 --> 00:25:44,720
Speaker 3: are some of the key issues to watch it. In

491
00:25:44,760 --> 00:25:49,959
Speaker 3: the meantime, I suspect they'll be negotiating with investors and

492
00:25:50,080 --> 00:25:50,440
Speaker 3: just so.

493
00:25:50,359 --> 00:25:53,640
Speaker 1: We know the importance of this in the region, Mary Ellen,

494
00:25:53,680 --> 00:25:57,320
Speaker 1: what's the scale? How important is this company? You know,

495
00:25:57,359 --> 00:25:59,480
Speaker 1: we've had a Danny blow up this year, We've had

496
00:25:59,480 --> 00:26:01,760
Speaker 1: all the real life state issues in China. Is this

497
00:26:02,040 --> 00:26:05,760
Speaker 1: just another sign of distress spreading through the Asia credit

498
00:26:05,800 --> 00:26:08,000
Speaker 1: markets as rates stay high and the economy start to

499
00:26:08,000 --> 00:26:08,480
Speaker 1: slow down.

500
00:26:11,560 --> 00:26:14,880
Speaker 3: I think you the Danta is probably a little bit

501
00:26:14,960 --> 00:26:19,480
Speaker 3: more unique. You know, it is caught up I think

502
00:26:19,520 --> 00:26:22,400
Speaker 3: in the higher rates and the very limited access to capital.

503
00:26:22,480 --> 00:26:26,160
Speaker 3: I think that it's been, uh, it's been harder road

504
00:26:26,200 --> 00:26:29,240
Speaker 3: for them because of the current environment in the in

505
00:26:29,280 --> 00:26:33,240
Speaker 3: the credit markets just to get funding. But this liquidity

506
00:26:33,280 --> 00:26:36,600
Speaker 3: issue has been ongoing for a while because they're you know,

507
00:26:36,640 --> 00:26:39,040
Speaker 3: for a long time they've had a very complex corporate

508
00:26:39,040 --> 00:26:43,160
Speaker 3: structure and they've been over leveraged. So in that regard,

509
00:26:44,119 --> 00:26:47,240
Speaker 3: it's you know, it's just progression along the same road

510
00:26:47,359 --> 00:26:51,280
Speaker 3: for the past you know, year and a half terms

511
00:26:51,280 --> 00:26:53,800
Speaker 3: and of how they're going to meet their their payment.

512
00:26:54,720 --> 00:26:58,200
Speaker 3: But what's unusual about the company in terms of its

513
00:26:58,240 --> 00:26:59,800
Speaker 3: peer group is that it does have a lot of

514
00:27:00,240 --> 00:27:03,640
Speaker 3: dead outstanding compared to most of the companies that I cover.

515
00:27:04,680 --> 00:27:08,800
Speaker 3: So it still has about four billion, and that's one

516
00:27:08,840 --> 00:27:11,119
Speaker 3: of the largest company that I cover that's not a

517
00:27:11,200 --> 00:27:13,640
Speaker 3: state backed then today, thank.

518
00:27:13,440 --> 00:27:16,560
Speaker 1: You very much Mary Ellen Olson of Bloomberg Intelligence. You

519
00:27:16,560 --> 00:27:19,480
Speaker 1: can read all her great analysis on the Bloomberg Terminal.

520
00:27:19,560 --> 00:27:21,080
Speaker 1: Do check it out and hope to see you back

521
00:27:21,119 --> 00:27:23,800
Speaker 1: on the show soon. Mary Ellen, thanks a lot, and

522
00:27:23,880 --> 00:27:26,840
Speaker 1: thanks again to Kalibmetuur from Bloomberg News. Read all of

523
00:27:26,880 --> 00:27:29,440
Speaker 1: his great credit scoops on the terminal and at Bloomberg

524
00:27:29,480 --> 00:27:33,040
Speaker 1: dot com, and please do subscribe wherever you get your podcasts.

525
00:27:33,040 --> 00:27:35,879
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527
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Speaker 1: at Bloomberg dot net. That's Jay for James c r

528
00:27:43,600 --> 00:27:46,520
Speaker 1: O M B I E as in my surname and

529
00:27:46,560 --> 00:27:51,280
Speaker 1: the number eight at Bloomberg dot net. I'm James Crombie.

530
00:27:51,320 --> 00:27:53,320
Speaker 1: It's been a pleasure having you join us again next

531
00:27:53,320 --> 00:28:05,000
Speaker 1: week on the Credit Ledge