Sterlite to Raise 500 crore to Refinance Debt

Co plans to sell ten-year bonds with a call option at the end of 5 yrs

Sterlite Industries, a unit of Vedanta Resources, plans to raise . 500 crore selling tenyear bonds with a call option at the end of five years, to refinance existing debt as interest rates have softened. 
The metals company will raise the funds at a coupon of 9.24%, 16 basis points lower than what it paid last month, said two persons familiar with the development. These AA+ rated bonds will have a call and put option, they said. A basis point is 0.01 percentage points. 
"'The funds raised may be used to refinance their existing loans,'' said one of the persons who did not want to be identified. "These bonds may be aggressively priced, but there is a premium attached to such names due to lower supply and need for risk diversification." Sterlite did not respond to emails. Sterlite and Vedanta Aluminium are among Vedanta Group companies raising funds from the market to lower the cost of funds the group had accumulated for the acquisition of Cairn India and other assets. In fact, investors are expecting the company to come to market with bond sales to possibly fund the purchase of the residual government stake in Hindustan Zinc and Balco. 
Sterlite Industries had raised . 1,000 crore in November in two tranches of . 500 crore each, in tenors of ten years at 9.4%. Sterlite and Sesa Goa, the mining company of the group, are being merged and the stakes in various group companies are brought under the merged company to simplify a complex structure. The merger exercise would make it among the top 10 mining firms. 
Indian debt market has found favour with best rated corporates since, they cannot borrow at anything lower than the base rate from banks, which is above 10% for most banks, while they can still borrow at around 9% in the corporate debt market. 
Indian companies have borrowed . 1.7 lakh crore through bond issuances between January and October. Sterlite Industries reported consolidated net profit of . 2,944 crore in the first half of FY13, up 12% year-on-year. 
Debt Trap 

• THE METALS COMPANY 
will raise the funds at a coupon of 9.24%, 16 basis points lower than what it paid last month 

• THESE AA+ RATED 
bonds will have a call and put option 

• STERLITE INDUSTRIES 
had raised . 1000 crore in November in two tranches of . 500 cr each