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Deadline for Vodafone Idea’s funding talks extended to February 28

The deadline for exclusive talks between Vodafone Idea (Vi) and a foreign lenders’ consortium led by Oak Hill Advisors for finalising the terms of a $2-billion credit line for the telco has been extended to February 28 from January 31, said three people with direct knowledge.

“The lock-in for exclusive talks has been extended as lenders are keen to close the deal but also want some safeguards and business milestones in place to protect their potential investments, especially as Vi’s financial struggles seem far from over as it continues to lose revenue and users,” a person close to consortium told ET.

An investment banker, who works closely with the telco, said raising debt would be a more realistic option for Vi in the near term as equity financing would hinge on fresh capital infusion by its co-promoters, Vodafone Group Plc and the Aditya Birla Group.

An improved balance sheet and competitive position are other key factors to attract equity funding.

“Most prudent approach would be a combination of debt and equity but it would make sense for Vi to tap equity markets once profitability returns, whereas debt-raising could happen immediately,” the banker said.

US-based investment firm Oak Hill is leading the consortium, which includes GoldenTree Asset Management, Pacific Investment Management Co, Sixth Street, Twin Point Capital and Varde Partners to provide an around $2 billion (Rs 14,600 crore) credit line to Vi.

One member of this consortium is believed to have recently pulled out after differences over funding terms and Vi’s valuation, said a person familiar with the matter. But other potential global lenders remained committed to participate in the fundraise via hybrid convertible funding instruments, comprising bonds and warrants with a linked equity option that would allow them to eventually convert a portion of their loans into shares in Vi, the person added. Koliasa

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