WEBVTT - Bond Barrage Leaves Buyers Wanting More; India Risk 0:00:16.560 --> 0:00:19.320 Hello, and welcome to The Credit Edge, a weekly markets podcast. 0:00:19.520 --> 0:00:22.200 My name is James Crumbie. I'm a senior editor at Bloomberg. 0:00:23.000 --> 0:00:24.880 This week, we're very pleased to have on the show 0:00:25.160 --> 0:00:28.280 Kalied Matuur, who covers credit markets for Bloomberg News in 0:00:28.320 --> 0:00:30.160 New York. How are you cal. 0:00:30.480 --> 0:00:32.280 I'm doing for a while, Jims, Thanks for having me. 0:00:32.880 --> 0:00:34.800 We're very excited to get your take on the markets. 0:00:34.840 --> 0:00:38.000 Thanks very much for joining. We're also delighted to welcome 0:00:38.040 --> 0:00:41.400 back Mary Ellen Olsen, a credit analyst with Bloomberg Intelligence 0:00:41.440 --> 0:00:44.440 in Hong Kong. We'll be talking to Mary Ellen a 0:00:44.440 --> 0:00:47.600 bit later in the show about Vedanta, an Indian company 0:00:47.600 --> 0:00:49.960 that's been running into trouble with a ton of dollar debt. 0:00:50.040 --> 0:00:54.280 So do stay with us, But first, Khalid Matuur with 0:00:54.280 --> 0:00:57.040 Bloomberg News, you've been all over the corporate bond story. 0:00:57.400 --> 0:01:00.120 This month was the busiest September ever for core for 0:01:00.240 --> 0:01:03.680 bond sales, with more than one hundred and ten billion 0:01:03.720 --> 0:01:06.920 dollars sold in the first week. We did expect a 0:01:06.920 --> 0:01:09.600 bit of a rush. September is always busy as investors' 0:01:09.600 --> 0:01:13.000 return from vacation with money to spend, and issuers usually 0:01:13.000 --> 0:01:15.399 look to take advantage of that. But why are they 0:01:15.440 --> 0:01:17.600 moving so fast now? What's the story? 0:01:17.600 --> 0:01:21.000 Cal Well? As you put it, James, usually September is 0:01:21.040 --> 0:01:25.200 a very busy time, busy month for issues. And the 0:01:25.240 --> 0:01:28.360 reason they're coming now is because if you think about it, 0:01:28.400 --> 0:01:31.160 if you're a CFO of a company, for instance, you 0:01:31.280 --> 0:01:34.320 have your borrowing needs for the year, you're looking at 0:01:34.360 --> 0:01:38.000 the issues calendar, and really after September things really start 0:01:38.080 --> 0:01:40.960 to slow down. You know, October people are starting to 0:01:42.080 --> 0:01:45.039 report their earnings and usually around that time companies don't 0:01:45.080 --> 0:01:48.440 sell debt. So really September is that really good window 0:01:48.520 --> 0:01:50.760 for you to really take your business. 0:01:51.480 --> 0:01:53.280 So later in the month, I mean there's going to 0:01:53.320 --> 0:01:56.600 be some earnings blackouts because the FED coming up. Does 0:01:56.640 --> 0:01:59.200 that mean that companies have to do it before those 0:01:59.200 --> 0:01:59.760 things happen? 0:02:00.480 --> 0:02:02.800 Absolutely, and that's what they've been trying to do. We've 0:02:02.840 --> 0:02:04.760 seen a lot of big companies, not just in the 0:02:04.840 --> 0:02:08.160 US but globally really take advantage of this window. You know, 0:02:08.240 --> 0:02:10.839 last week we saw Philip Morris come to the market. 0:02:10.880 --> 0:02:13.720 Just this week two Mobile raised two billion. You know, 0:02:13.800 --> 0:02:15.960 we've seen big banks two come to the market and 0:02:16.080 --> 0:02:18.280 just there the day we had Bank of America come 0:02:18.320 --> 0:02:20.680 to the market as well, So it's really everyone coming 0:02:20.720 --> 0:02:22.399 in and saying, you know what, this is a good 0:02:22.440 --> 0:02:25.000 and a good window to issue that, and you know, 0:02:25.040 --> 0:02:27.400 you might as well take care of the opportunity of 0:02:27.440 --> 0:02:28.919 the opportunity while it's still there. 0:02:29.720 --> 0:02:33.320 Are these deals mostly raising money for refinancing or for 0:02:33.480 --> 0:02:35.760 new projects or what are they spending that money. 0:02:35.480 --> 0:02:40.079 On, right, right, So it's mostly refinancing. And what's really 0:02:40.080 --> 0:02:43.519 happening here. GM says borrowing costs have gone up quite 0:02:43.560 --> 0:02:45.840 a bit. If we just step back and look at 0:02:46.840 --> 0:02:50.160 March last year, just when FED was starting to high 0:02:50.200 --> 0:02:52.560 rate the borrowing costs, if you look at the yield 0:02:52.720 --> 0:02:55.400 on an average bond, it was it was around three 0:02:55.600 --> 0:02:59.400 three three percent, and now just looked at this morning, 0:02:59.440 --> 0:03:01.880 it's a it's nearly six percent. You're looking at five 0:03:01.880 --> 0:03:05.640 point eight percent. So borrowing costs are almost doubled here. 0:03:06.120 --> 0:03:08.960 And so if you're a company, you're thinking you really 0:03:08.960 --> 0:03:11.600 want to issue deb if you really need to write, 0:03:11.840 --> 0:03:14.080 and so it really boils down to you know, whether 0:03:14.120 --> 0:03:16.680 you need to refinance, whether you need to push out maturity, 0:03:16.960 --> 0:03:19.360 and then for the other reasons, the usually company borrow 0:03:19.480 --> 0:03:21.239 or you can wait you know, you can really wait 0:03:21.320 --> 0:03:23.600 until borrowing costs go down and then you have a 0:03:23.680 --> 0:03:25.000 much better window to issue. 0:03:25.480 --> 0:03:27.359 So just to be clear, on that yield, you're talking 0:03:27.400 --> 0:03:30.680 about six percent. That's for investment grade companies. 0:03:30.320 --> 0:03:33.480 Right, absolutely, that's for you know, what we call investment 0:03:33.480 --> 0:03:36.480 grade companies, which is really just you know, these safer 0:03:36.560 --> 0:03:39.200 companies that are less likely to default and so they 0:03:39.240 --> 0:03:42.200 get us safer higher rating. And so we've seen a 0:03:42.240 --> 0:03:44.320 lot of those companies come to the market. But also 0:03:44.360 --> 0:03:47.040 the high yield market has been very, very very active. 0:03:47.280 --> 0:03:49.920 I was just looking at the Bloomberg data this morning, 0:03:49.960 --> 0:03:53.680 and we've had seven billion just this week, the last 0:03:53.720 --> 0:03:56.320 three days actually, and we have another four billion coming 0:03:56.360 --> 0:03:58.840 in and so we're having I mean, this market has 0:03:58.880 --> 0:04:01.200 not been this busys in mid May. So that just 0:04:01.280 --> 0:04:03.680 gives you a picture of like everyone is trying to 0:04:03.720 --> 0:04:05.720 come and everyone is really trying to take advantage of 0:04:05.720 --> 0:04:06.200 this window. 0:04:06.920 --> 0:04:09.240 And the yields on that stuff. I mean I'm looking 0:04:09.280 --> 0:04:11.400 at it, it's around eight and a half percent or something. 0:04:11.400 --> 0:04:14.840 And again, you know, like investment grade is doubled over 0:04:14.880 --> 0:04:20.360 the last year, so it's a lot more expensive. Why 0:04:20.400 --> 0:04:21.480 are they paying. 0:04:21.320 --> 0:04:25.000 Up the companies the companies. 0:04:25.040 --> 0:04:27.520 You mean, yeah, I mean, so if it's so expensive, 0:04:27.800 --> 0:04:28.920 why don't they just wait it out? 0:04:30.120 --> 0:04:32.120 I mean, if you need to push out maturities and 0:04:32.160 --> 0:04:34.360 then gyms, you really don't have any other option, right, 0:04:34.440 --> 0:04:37.159 you have to really take care of that business. You 0:04:37.200 --> 0:04:39.359 really have to issue that And going back to what 0:04:39.400 --> 0:04:42.200 I was saying earlier, this companies are being very, very 0:04:42.279 --> 0:04:46.599 very strategic about their borrowing plans, right, you really need 0:04:46.640 --> 0:04:48.680 to come to the market when if you really need to, 0:04:48.839 --> 0:04:51.080 you know, if you go down to high yield. You know, 0:04:51.160 --> 0:04:53.320 we're starting to see the LBO market open up a 0:04:53.360 --> 0:04:56.680 little bit. We're starting to see you know, more deals 0:04:56.720 --> 0:05:00.000 come to the market, and so they're issuing for a different. 0:04:59.760 --> 0:05:02.720 Reason on So just on the refinancing side, I mean, 0:05:02.720 --> 0:05:05.400 we have talked a lot about there is a kind 0:05:05.400 --> 0:05:09.279 of a wall of maturities approaching investment grade and high 0:05:09.320 --> 0:05:11.719 yield companies. You know that it really does get quite 0:05:11.760 --> 0:05:14.800 high in say twenty twenty five, twenty twenty six, So 0:05:14.960 --> 0:05:17.640 this a lot of decisues. What you're saying is that 0:05:17.680 --> 0:05:20.919 they are using this money to pay down some of 0:05:20.960 --> 0:05:23.080 that maturity to sort of iron out that hump. 0:05:23.760 --> 0:05:26.320 Absolutely, I mean I have to say, this company is 0:05:26.320 --> 0:05:28.000 for the most but a lot of companies did a 0:05:28.040 --> 0:05:30.920 good job pushing out maturities, right. You know, we had 0:05:31.600 --> 0:05:36.440 this long period of easy, easy monetary policies and rids 0:05:36.520 --> 0:05:38.840 were quite low, and a lot of companies took advantage 0:05:38.839 --> 0:05:41.480 of that and pushed out their maturity walls. But still 0:05:41.520 --> 0:05:43.640 their companies that still need to do this, and those 0:05:43.680 --> 0:05:45.839 are the companies that we're seeing come to the market now. 0:05:47.040 --> 0:05:49.159 The deals that we're seeing, are they going well in 0:05:49.240 --> 0:05:52.360 terms of demand? Are we seeing investors really keen to 0:05:52.400 --> 0:05:53.400 snap this debt up? 0:05:54.400 --> 0:05:56.360 Right? So if I can focus a bit and just 0:05:56.480 --> 0:06:00.640 look at IG for a minute here, kid, you know, 0:06:00.760 --> 0:06:03.480 it's you know, the demand there is quite strong. It's 0:06:03.560 --> 0:06:06.640 really quite strong. A good example that comes to mind. 0:06:06.680 --> 0:06:09.640 We had this utility company, Sierra Pacific come to the 0:06:09.680 --> 0:06:12.600 market yesterday, JYMS. This company was looking to raise four 0:06:12.680 --> 0:06:17.000 hundred million, right, and because it was issuing on the 0:06:17.120 --> 0:06:20.640 longer end of things, so this bonce mature entire years, 0:06:21.120 --> 0:06:23.880 it got a huge, huge demand. We're talking about three 0:06:23.880 --> 0:06:26.800 point four billion for a four hundred million deal. So 0:06:26.839 --> 0:06:29.440 that just tells you how much investors are looking for 0:06:29.480 --> 0:06:32.440 these bonds, and especially the longer deted bonds because that's 0:06:32.440 --> 0:06:33.320 where the yield. 0:06:33.120 --> 0:06:38.360 Is, so the long end. You mentioned that that's interesting. 0:06:39.560 --> 0:06:42.400 What are we seeing in terms of issuans. There are 0:06:42.480 --> 0:06:46.080 companies locking in these high rates for the long term 0:06:46.160 --> 0:06:46.599 right now. 0:06:47.200 --> 0:06:50.480 It's actually quite the opposite on the most part. So 0:06:51.279 --> 0:06:54.359 because because rates have gone up so much and borrowing costs, 0:06:54.720 --> 0:06:59.040 you know, are high, a lot of companies are choosing 0:06:59.080 --> 0:07:02.320 to issue bonds that mature and relatively very short periods 0:07:02.320 --> 0:07:05.159 of time. So we're talking two years, we're talking three years, 0:07:05.240 --> 0:07:09.080 five years, some ten years. But you know, if you 0:07:09.200 --> 0:07:10.600 just look at the deals that have come to the 0:07:10.640 --> 0:07:13.120 market from last week, a lot of these deals are 0:07:13.160 --> 0:07:16.600 shorter dated bonds. Now. Investors, on the other hand, are 0:07:16.640 --> 0:07:20.280 looking for longer dated bonds, right you know, people are 0:07:20.320 --> 0:07:23.320 just becoming more optimistic that the Fed is cutting rates 0:07:23.440 --> 0:07:26.920 and the economy. You know, people expected, you know, a 0:07:27.000 --> 0:07:29.120 very hard recession here and now we are starting to 0:07:29.120 --> 0:07:31.160 talk about our soft landing. Some people have been talking 0:07:31.200 --> 0:07:33.960 about we might not have a recession, right and so 0:07:34.040 --> 0:07:38.240 for investors, they're becoming more optimistic about the outlook and 0:07:38.360 --> 0:07:41.200 for them, longer debatd bondes are becoming more attractive, and 0:07:41.240 --> 0:07:43.280 so they're looking for a lot more of these longer, 0:07:43.280 --> 0:07:43.920 deaded bones. 0:07:44.680 --> 0:07:48.720 So from an issue perspective, are they sitting there thinking, well, 0:07:48.760 --> 0:07:50.800 hang on a minute, we don't want a lot these 0:07:50.880 --> 0:07:52.640 high rates in for a long time, and we think 0:07:52.640 --> 0:07:54.520 they're going to come down, so it's going to become 0:07:54.960 --> 0:07:58.640 cheaper for us to issue at some point Soon's. 0:07:57.840 --> 0:08:00.320 That's exactly what's happening. You know, in my report, I've 0:08:00.320 --> 0:08:03.000 talked to CFOs, I've talked to investors, and that's really 0:08:03.040 --> 0:08:05.440 the thinking here. If you're a CFO, you're thinking, you know, 0:08:06.000 --> 0:08:08.400 I'm going to issue two years, three years, you know, 0:08:08.640 --> 0:08:12.640 hopefully around you know, after twenty four, twenty five, you know, 0:08:12.720 --> 0:08:15.240 we're probably going to have a totally different landscape here 0:08:15.600 --> 0:08:17.640 and maybe that would be a good time to go along. 0:08:17.760 --> 0:08:20.040 So for now, you know, issue short bones and just 0:08:20.120 --> 0:08:21.600 wait for the third to blink. 0:08:22.000 --> 0:08:23.640 Because on the one hand, you know this is higher 0:08:23.640 --> 0:08:26.760 for longer narrative seems to be really taking hope. Typically 0:08:26.800 --> 0:08:29.120 on the investors side, I mean, they're keen to see 0:08:29.160 --> 0:08:31.680 these rates stay up. But then with saying that, on 0:08:31.720 --> 0:08:35.480 the borrower side on from Corporate America, they're not buying it. 0:08:35.480 --> 0:08:37.520 They're betting against it in some ways. 0:08:38.280 --> 0:08:40.520 That's what's happening. That's what's happening. It's all of a 0:08:40.600 --> 0:08:43.000 conundrum if you're an investor, if you're if you're a borrower, 0:08:43.000 --> 0:08:45.600 you're thinking, well, I don't want to get locked in 0:08:45.640 --> 0:08:48.480 this really high rates, and so I'm going to issue shot. 0:08:48.640 --> 0:08:51.040 And then you're looking at the market. There's such a 0:08:51.120 --> 0:08:53.240 huge demand for the long dated bonds, and so we've 0:08:53.280 --> 0:08:56.040 started to see a little bit of issuers try to 0:08:56.120 --> 0:08:58.320 issue long at dated bonds. A good example was the 0:08:58.440 --> 0:09:01.360 Sierra Pacific I just gave you because there's really demand 0:09:01.360 --> 0:09:02.959 for it, and you can bring down the price when 0:09:02.960 --> 0:09:03.880 you're issuing this boonce. 0:09:05.120 --> 0:09:07.800 Let's talk about the price. So for the market, I mean, 0:09:08.120 --> 0:09:11.880 whenever there's a lot of supply, it tends to hurt 0:09:11.880 --> 0:09:13.400 the price. And we're seeing that a little bit on 0:09:13.400 --> 0:09:14.880 the high yield side right now that there is a 0:09:14.920 --> 0:09:17.160 lot of issuanes as you said, and the spreads are 0:09:17.160 --> 0:09:19.680 starting to widen. Now are we saying the same thing 0:09:20.360 --> 0:09:23.040 an investment grade is you know, there's all this supplies, 0:09:23.040 --> 0:09:25.079 it's starting to hit the price and it's starting to 0:09:25.120 --> 0:09:26.040 push spreads wider. 0:09:28.000 --> 0:09:31.559 We've seen a few cases where deals struggle a little bit, 0:09:31.840 --> 0:09:34.120 but Jim's for the most part, these deals are doing 0:09:34.160 --> 0:09:37.360 really well. I mean, a a good indicator to look 0:09:37.400 --> 0:09:39.640 at it is what we call the new issue concessions, 0:09:39.640 --> 0:09:42.520 which is really just the extra yield premium that companies 0:09:42.559 --> 0:09:46.400 paid to sell this bonds. It's really it's really not 0:09:46.480 --> 0:09:49.120 that bad. You know, year to date, on average, it's 0:09:49.120 --> 0:09:52.319 about eight points something basis points. You know, if you 0:09:52.360 --> 0:09:54.480 look at the whole of twenty twenty two, it was 0:09:54.480 --> 0:09:57.000 I think about thir team basis points. So that just 0:09:57.080 --> 0:10:00.040 tells you that the demand is there and actually the 0:10:00.040 --> 0:10:01.440 stills are not doing bad at all. 0:10:02.440 --> 0:10:04.679 Also interesting in your reporting, I mean you say that, 0:10:04.760 --> 0:10:08.520 you know, we expect a big September for issuance. We 0:10:08.559 --> 0:10:10.560 expect let's say, one hundred and twenty billion, which is, 0:10:10.600 --> 0:10:12.840 you know, a decent amount for a month, but if 0:10:12.880 --> 0:10:16.280 we look back in history, it's still less than you know, 0:10:16.400 --> 0:10:18.160 I mean, last year was a bit slow, but it's 0:10:18.160 --> 0:10:21.080 still less than the average over quite a long period. 0:10:21.120 --> 0:10:24.120 So you know, essentially, you know, it looks like a 0:10:24.120 --> 0:10:25.760 big month, but it may not end up being. Then 0:10:25.800 --> 0:10:27.640 on top of that, we've got all this what we 0:10:27.679 --> 0:10:31.240 call liability management where bond bonds are taken out by companies, 0:10:31.280 --> 0:10:32.920 you know, they're buying them back, either in the open 0:10:32.960 --> 0:10:36.800 market or through tender offers. Let me flip the question then, 0:10:36.840 --> 0:10:39.120 is there enough to go around? Demand seems to be 0:10:39.120 --> 0:10:42.840 fairly steady, but supply is dropping. Shouldn't that make spreads 0:10:42.880 --> 0:10:43.400 even tighter? 0:10:44.840 --> 0:10:46.960 You would you would think that, you would think that. 0:10:47.640 --> 0:10:51.280 And to your point, supply is expected to you know, 0:10:51.400 --> 0:10:53.760 to be low this year just because of what we've 0:10:53.760 --> 0:10:56.200 talked about. Borrowing costs are just very prohibitive for a 0:10:56.200 --> 0:11:00.400 lot of issues, and so people expect, you know, supply 0:11:00.559 --> 0:11:03.320 to sort of underwhelm a little bit here. But spreads 0:11:03.320 --> 0:11:06.360 are you know, held quite quite quite fairly well, if 0:11:06.400 --> 0:11:08.679 you think about it. I mean, we saw them like 0:11:08.800 --> 0:11:11.360 kind of jump a bit in you know, Elia this 0:11:11.480 --> 0:11:14.600 year when we had the bunking crisis. But they're fairly 0:11:14.800 --> 0:11:17.400 doing well. They're fairly you know, range bound. 0:11:18.760 --> 0:11:21.560 So before we talked to Mary ellen Olsen about Asia, 0:11:21.800 --> 0:11:24.120 tell us cal what else is on your radar. You've 0:11:24.160 --> 0:11:27.200 also been doing some great work on the ESG debt market, 0:11:27.240 --> 0:11:29.680 which has suffered a bit of a political backlash in 0:11:29.720 --> 0:11:32.000 the US. How's that market? Doing this year. Are we 0:11:32.040 --> 0:11:33.280 seeing a bit of a comeback there? 0:11:33.920 --> 0:11:36.640 We've seen quite a huge rebound this year, James. I mean, 0:11:37.200 --> 0:11:39.320 just if we just focus on green bones, which is 0:11:40.000 --> 0:11:43.000 the largest part of sustainable debt market, you know, it's 0:11:43.040 --> 0:11:45.280 expected to hit a record this year. I mean, the 0:11:45.320 --> 0:11:47.920 most we've seen was in twenty twenty one, we had 0:11:47.960 --> 0:11:50.800 around five hundred and twelve billion. This year we might 0:11:50.880 --> 0:11:54.160 go past six hundred billion. And so we've seen really 0:11:54.280 --> 0:11:57.400 quite a huge rebound globally for this kind of bonds. 0:11:58.000 --> 0:12:00.720 What's interesting, though, is to your point, US is kind 0:12:00.720 --> 0:12:02.559 of struggling a little bit here. We've seen quite a 0:12:02.559 --> 0:12:04.719 bit of pushbuck you know, you know a lot of 0:12:04.720 --> 0:12:08.160 people pushing back just on ESG strategy, you know, and 0:12:08.200 --> 0:12:11.280 so issues are starting to be more careful, right and 0:12:11.320 --> 0:12:13.920 so in the US they're issuing less of this once. 0:12:13.960 --> 0:12:16.360 But for the rest of the world, it's it's a 0:12:16.360 --> 0:12:16.920 big party. 0:12:18.080 --> 0:12:21.040 Great stuff. Calp Matua from Bloomberg News, thank you so 0:12:21.120 --> 0:12:21.840 much for joining us. 0:12:22.280 --> 0:12:23.679 Thank you. 0:12:23.679 --> 0:12:26.240 You can read all Kyl's scoops on the Bloomberg Terminal 0:12:26.320 --> 0:12:29.640 and of course at Bloomberg dot com. Right now. We're 0:12:29.679 --> 0:12:32.320 delighted to welcome back on the credit edge. Mary Ellen Olsen, 0:12:32.320 --> 0:12:35.280 who covers commodities for Bloomberg Intelligence based in Hong Kong. 0:12:35.760 --> 0:12:37.959 How's it going, Mary Ellen? Staying dry over there? 0:12:38.480 --> 0:12:40.640 Ah, well, it's going well, but I can't say I'm 0:12:40.640 --> 0:12:44.040 staying dry. It's been raining here for about the past month, 0:12:44.120 --> 0:12:46.000 I think, and it looks like it's going to continue 0:12:46.000 --> 0:12:49.320 to reign for the next week. So other than that, yes, good, 0:12:49.320 --> 0:12:50.040 thanks for having me. 0:12:50.679 --> 0:12:52.360 Great to see you again. And I know you cover 0:12:52.400 --> 0:12:54.800 a lot of different countries and companies, but I wanted 0:12:54.880 --> 0:12:57.800 to focus this time on India in particular a company 0:12:57.840 --> 0:13:02.320 called Vedanta. It's a junk rated Indian mining company that 0:13:02.480 --> 0:13:06.000 faces repayment of a record two billion dollars in debt 0:13:06.040 --> 0:13:08.559 next year. Some of those bonds are trading at distress 0:13:08.640 --> 0:13:10.800 levels and we've talked about that company quite a few 0:13:10.840 --> 0:13:13.160 times on this show already. But what's the latest there, 0:13:13.200 --> 0:13:15.160 Mary Ellen. I mean, you know, a lot of companies 0:13:15.200 --> 0:13:17.360 have a lot of debt due over the next few years. 0:13:17.880 --> 0:13:20.280 Why is this one in particular coming under so much 0:13:20.280 --> 0:13:21.120 pressure right now? 0:13:22.640 --> 0:13:25.319 I think that this one is different because it has 0:13:25.400 --> 0:13:27.880 so much debt do in such a short short period 0:13:27.920 --> 0:13:32.640 of time. So through twenty twenty six, it has about 0:13:32.679 --> 0:13:35.800 three point eight billion in dollar bonds that will fall 0:13:35.880 --> 0:13:40.559 due and right now we're looking at the next repayment 0:13:40.640 --> 0:13:45.720 to happen in January twenty twenty four. So the build 0:13:45.760 --> 0:13:47.679 up has been you know, how how are they going 0:13:47.720 --> 0:13:50.280 to make the payment on this one billion dollar of 0:13:50.520 --> 0:13:55.240 debt that's outstanding, And heading into this week, we actually 0:13:55.320 --> 0:13:58.880 knew that the company was looking at raising new debt, 0:13:58.920 --> 0:14:03.959 potentially backed by royalties on brand fees. It was also 0:14:04.040 --> 0:14:07.720 looking at a potential debt ext extension or a debt 0:14:07.720 --> 0:14:12.400 restructuring initiative, and it was also holding investor meetings in 0:14:12.440 --> 0:14:17.280 Hong Kong and Singapore. So today I did wake up 0:14:17.280 --> 0:14:19.600 to some new news which I was hoping I could 0:14:19.640 --> 0:14:20.360 fill you in on. 0:14:21.400 --> 0:14:24.240 So that's great. There is some progress, but I mean 0:14:24.400 --> 0:14:27.720 since we last talked about them in let's say March, 0:14:27.760 --> 0:14:28.880 I mean it was quite a long time ago we 0:14:28.920 --> 0:14:32.080 started talking about Verdane. But how much progress have they 0:14:32.080 --> 0:14:33.560 actually made? 0:14:34.000 --> 0:14:36.520 They have made progress. They had some dollar bonds that 0:14:36.560 --> 0:14:40.120 were due earlier this year which they have repaid, and 0:14:40.160 --> 0:14:43.920 they've also you know, embarked or continued on an overall 0:14:43.960 --> 0:14:48.480 debt restriction debt reduction strategy for the holding company. But 0:14:48.600 --> 0:14:51.360 a lot of those initiatives have only kicked the can 0:14:51.440 --> 0:14:54.320 really down the road, so they haven't really you know, 0:14:55.840 --> 0:15:00.000 mounted the overall liquidity or the refinancing hurdles in any 0:15:00.080 --> 0:15:02.760 one particular action since we last. 0:15:02.640 --> 0:15:06.080 Spoke and we talked a little bit about debt reduction. 0:15:06.120 --> 0:15:07.080 But how are they funding that? 0:15:09.040 --> 0:15:12.240 They Well, they have funded it through a variety of means. 0:15:12.280 --> 0:15:18.600 Most recently, they initiated a stake sale from their operating company, 0:15:18.680 --> 0:15:21.440 Vedanta Limited. They sold about a four percent stake and 0:15:21.560 --> 0:15:25.440 raised five hundred million, and that that occurred in August, 0:15:25.600 --> 0:15:28.760 and that brought in some money to the coffers, which 0:15:28.800 --> 0:15:32.120 I think people were looking to to provide liquidity for 0:15:32.160 --> 0:15:35.280 this upcoming debt payment in January. 0:15:36.320 --> 0:15:39.640 Okay, so they are getting some relief, but I mean, 0:15:39.680 --> 0:15:41.880 are they selling off assets that are crucial to their 0:15:41.920 --> 0:15:44.440 operating Are they selling off the crown jewels at this point? 0:15:47.000 --> 0:15:51.240 Well, they have said interestingly that the chairman has said 0:15:51.240 --> 0:15:55.480 that they would be looking at potentially creating some pure 0:15:55.680 --> 0:16:00.240 play investment silos from some of its divisions, which which 0:16:00.320 --> 0:16:05.960 could happen through the oil and Gas division, also the 0:16:06.000 --> 0:16:10.600 aluminum division and potentially some a steel company's sale. But 0:16:10.880 --> 0:16:13.200 I don't think that those things are necessarily going to 0:16:13.240 --> 0:16:16.360 be happening very quickly. You know, asset sales do take 0:16:16.800 --> 0:16:19.920 a while, and these are the at least the aluminum 0:16:20.600 --> 0:16:23.000 and the oil and Gas division are some of the 0:16:23.040 --> 0:16:26.600 bigger divisions they account I think for the aluminum division 0:16:26.760 --> 0:16:29.560 is about fifteen percent of EBDEL while the oil and 0:16:29.600 --> 0:16:34.280 Gas division is closer to around twenty percent. So they're 0:16:34.320 --> 0:16:37.960 pretty big companies, and you know, they're in commodity industry 0:16:38.000 --> 0:16:40.000 and they make money, but it takes a while to 0:16:40.000 --> 0:16:41.960 sell the asset. So I think that it really did 0:16:42.040 --> 0:16:47.120 need to look at some other alternatives to bring money 0:16:47.120 --> 0:16:51.280 in to bridge the liquidity gap, so it could have 0:16:51.320 --> 0:16:53.600 some breathing room in order to affect these asset sales 0:16:53.640 --> 0:16:54.720 perhaps later down the road. 0:16:56.040 --> 0:16:59.040 You mentioned the meeting investors right now, the meeting them 0:16:59.080 --> 0:17:01.520 we're in Hong Kong, Spole, other parts of Asia. But 0:17:01.800 --> 0:17:04.359 how do you think the investors will be reacting right 0:17:04.440 --> 0:17:07.840 now given that the bonds are trading at distress levels. 0:17:08.359 --> 0:17:11.560 Well, what came out from the news today, and I 0:17:11.600 --> 0:17:14.920 haven't spoken to any investors who have actually sat in 0:17:15.080 --> 0:17:19.000 on meetings with the companies, yet they only invited specific 0:17:19.240 --> 0:17:23.000 investors from what I've heard, But what's come out in 0:17:23.000 --> 0:17:24.760 the news is a couple of things which I think 0:17:25.040 --> 0:17:27.560 are interesting to hear. The first one is that they 0:17:27.600 --> 0:17:32.199 are looking at raising new loans, potentially packed by this 0:17:32.320 --> 0:17:36.359 bran fee, and they are looking at debt extensions. And 0:17:36.400 --> 0:17:39.919 they're looking at extending the twenty twenty four and twenty 0:17:39.960 --> 0:17:43.080 five maturities and that's about three point two of the 0:17:43.160 --> 0:17:46.119 total debt outstanding of three point eight, so they're looking 0:17:46.160 --> 0:17:52.479 at a significant debt extension. And they're also looking at 0:17:52.480 --> 0:17:57.720 some other liability management exercises which could also extend their 0:17:58.640 --> 0:18:03.879 debt maturity profile and improve their overall liquidity. But the 0:18:04.760 --> 0:18:08.359 news itself actually did take me by surprise, and let 0:18:08.400 --> 0:18:12.080 me share with you why. I think in the first case, 0:18:12.520 --> 0:18:16.199 they had wrapped up the January twenty four bonds potentially 0:18:16.240 --> 0:18:18.640 in the debt extension, and I think that that will 0:18:18.680 --> 0:18:22.880 take those note holders by surprise because they were looking towards, 0:18:23.560 --> 0:18:26.480 you know, hopefully getting some new money into pay to 0:18:26.560 --> 0:18:29.560 pay them off in January. So that was one of 0:18:29.560 --> 0:18:32.720 the key takeaways from what the news that came out 0:18:32.760 --> 0:18:36.119 today and The other major news that or takeaway that 0:18:36.160 --> 0:18:38.720 I got was that the company actually is looking towards 0:18:38.720 --> 0:18:44.000 a debt extension. And it's interesting because Venantez always really 0:18:44.040 --> 0:18:46.280 made it a point that it has never defaulted on 0:18:46.359 --> 0:18:49.600 its debt. And you know, when you look at when 0:18:49.640 --> 0:18:52.080 you think of a debt extension, that can actually lead 0:18:52.119 --> 0:18:57.479 to a selective default designation by the rating agencies. And 0:18:57.560 --> 0:19:01.000 so this idea that they were doing this extension, and 0:19:01.960 --> 0:19:04.680 it did surprise me, but it does seem as though 0:19:04.720 --> 0:19:07.600 it could be a palatable solution for the company. 0:19:08.400 --> 0:19:10.320 Interesting you mentioned the raising agency. I did want to 0:19:10.359 --> 0:19:12.480 ask you about that. Man, how are they reacting generally? 0:19:12.520 --> 0:19:14.960 They are they putting pressure on the on the ratings 0:19:14.960 --> 0:19:16.200 that they're going to downgrade them. 0:19:17.640 --> 0:19:21.080 Well, the only SMP rates Vedanta at the moment, and 0:19:21.280 --> 0:19:24.640 they actually have the company at a B with a 0:19:24.880 --> 0:19:29.399 negative outlook. And I think that, you know, one of 0:19:29.480 --> 0:19:32.600 the key things that they're factoring into their credit rating 0:19:32.640 --> 0:19:36.800 at the moment is the company's commitment to make good 0:19:36.960 --> 0:19:41.520 on its dead outstanding. And I believe that one of 0:19:41.520 --> 0:19:46.240 the reasons why this kind of debt extension could be 0:19:46.280 --> 0:19:48.960 palatable to Vedanta. It could be a solution for them 0:19:49.680 --> 0:19:52.480 is if they're able to structure the transaction so that 0:19:52.480 --> 0:19:56.160 that doesn't actually result in a selective default, and that 0:19:56.160 --> 0:19:59.880 that could be possible if it does a concurrent fundraising 0:20:00.040 --> 0:20:04.120 as well as structures the transactions so that the existing 0:20:04.160 --> 0:20:07.320 bondholders get more value out of the new transaction. So 0:20:07.320 --> 0:20:09.160 I think that's that could be a road that could 0:20:09.200 --> 0:20:13.480 be interesting for them to pursue. And and you know, 0:20:13.520 --> 0:20:14.959 so it's kind of a different take on it than 0:20:15.000 --> 0:20:16.200 what I was thinking previously. 0:20:17.240 --> 0:20:20.600 Do the raisings really massive of Adentro at this point? 0:20:21.280 --> 0:20:25.399