Cairn India extends loan repayment by overseas parent firm

Mumbai, May 12 (IANS) Energy major Cairn India on Thursday said it has extended the repayment of a $1.25 billion loan it had extended to its parent group firm by two years

“Cairn India Holdings Ltd (CIHL), an overseas subsidiary of Cairn India Ltd, has decided to extend maturity of the loan of $1.25 billion, which was given for a term of two years in May, 2014, to THL Zinc Ltd (TZL), an overseas subsidiary of Vedanta Ltd, for a further period of two years,” the company said in a stock exchange filing.

The loan extension was “on arm’s length at a revised rate of interest of LIBOR + 450 basis points (bps) in the first year and at LIBOR + 475 bps in the second year as compared to the existing rate of LIBOR + 300 bps,” it said.

The extension follows a delay in the merger of Cairn India with its parent company – Anil Agarwal-led Vedanta Ltd – that would have led to the loan being written off.

Cairn had not disclosed extending of loan to its new parent group at the time in 2014.

On Thursday, Cairn said the loan rollover “is on terms that are market standards including change of control provisions and will continue to be secured by a guarantee from Vedanta Resources”.

“The return from the said loan will provide higher yield to CIHL compared to the return it is earning from its existing investments out of its cash and cash equivalents, which are in USD,” it said.

TZL is the holding company of the Vedanta Group’s international zinc business that comprises of assets in South Africa and Namibia.

In June last year, London-listed Vedanta Resources proposed merging Cairn India with Vedanta Ltd, which, if accomplished, could mean that the $1.25 billion loan would be written off.

Vedanta received approvals last September from both the Bombay Stock Exchange and the NSE on the company’s proposal to merge with its hydrocarbons subsidiary Cairn India.

Merging Cairn India with itself would provide Vedanta access to the oil explorer’s cash and help reduce its debt burden. Vedanta took majority control of Cairn India for $8.67 billion in 2011 and holds 59.9 percent in the latter through its various units.

Meanwhile, British oil major Cairn Energy has called for an annual general meeting of shareholders on Thursday in London to approve, among other things, the proposal to dispose of its 9.82 percent residual stake in Cairn India.

“One of the resolutions seeks approval of the renewal of the existing authority (renewed at last year’s AGM held on May 14, 2015) to dispose of all or part of the Group’s residual interest in Cairn India,” the company said on its website.

The proposal comes against the backdrop of the retrospective tax demand of Rs.29,000 crore from the Indian tax department Cairn has received, on alleged capital gains the company made in a 2006 reorganisation of its India business.

–IANS

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