Vodafone Idea dials US credit funds as part of money-raising plan

Kolkata| Mumbai: Vodafone Idea (Vi) has dialled top US credit funds to garner a sizable chunk of the ₹25,000 crore ($3.4 billion) it plans to raise to upgrade its network and meet adjusted gross revenue (AGR) liabilities, people aware of the plan said.The company has held initial discussions with Oak Hill Advisors, Marathon Asset Management, Spectrum Asset Management, Anchorage Capital and Providence Investment Management, the people said.The US credit funds are said to be working out a hybrid financing model for Vi, instead of standalone debt or equity. The funding structure, based on a risk assessment after consulting Vi’s shareholders and lenders, could include stiff conditions. These may include having a say in Vi's management or having board-level participation, given the loss-making telco’s stressed financial state and highly leveraged balance sheet. The final contours are not yet finalised.“Vi is likely to review the progress of the fundraising plan, including status of talks with the US credit funds, at a board meeting likely by the end of the month,” a top industry executive told ET. 78819782Hybrid Financing Models LikelyMultiple hybrid financing models could be in the works, including convertible debentures and senior notes, the executive said.Global credit funds invest in relatively riskier instruments, earning higher interest. For Vi, the rates may be in the high teens, if it works out.“Telecom is a low-margin business globally. You need to go extra miles to convince international funds,” said a senior executive based in Southeast Asia. The former head of a large bank is said to be helping in the negotiations.“International credit funds typically have stricter terms and conditions (in their credit agreements), relative to Indian bank lenders for distressed credit,” said Nitin Soni, senior director at global rating company Fitch.Such funds, he said, could ask for aggressive financial covenants to be met in a timely manner, failing which they could increase interest rates.Vi has also had exploratory talks with US private equity firm Blackstone to raise cash and has sounded out some asset reconstruction companies, industry executives said.Vodafone Group Plc, Oak Hill Advisors and Blackstone declined comment, while mails to the other US credit funds did not elicit any responses. Queries to Vi and the AV Birla Group stayed unanswered till press time Thursday.Last month, Vi’s board approved raising ₹25,000 crore through a mix of equity and debt to upgrade its network, take on Reliance Jio and Bharti Airtel and to meet its statutory AGR dues, with payouts including interest estimated at upwards of ₹7,000 crore annually for 10 years, starting March 2022.In addition, it needs to step up network capex to stem a rapid erosion of users ever since Vodafone India and Idea Cellular merged in August 2018.Vi’s promoters have said they won’t invest further in the telco, except for a pending ₹6,600 crore committed by Vodafone Group towards contingent liabilities, including AGR obligations.The telco had outstanding cash and equivalents of ₹3,450 crore in the quarter ended June and net debt of ₹1.16 lakh crore, including ₹92,270 crore of deferred spectrum liability.

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