INDIA: United Spirits announces debt funding
United Spirits has said that it will use foreign currency convertible bonds to raise cash to pay down high interest-bearing debt.
United Spirits said yesterday (21 December) that it will issue US$175m in bonds in early 2012. It also has the option of issuing a further $50m in bonds at a later date.
In 2007, United Spirits significantly increased its debt by taking out $625m loan in order to acquire Whyte & Mackay. Since that point, it has sought to balance repayments with investment needs in a rapidly expanding Indian spirits market.
The group, which is India's largest distiller, said yesterday that the board has agreed the bond issue "with a view to bringing down the high cost of debt, and consequently improving profits". Standard Chartered Bank, Rabobank and DBS Bank will act as advisers.
In July 2011, United Spirits took out a fresh loan to refinance GBP375m (US$613.5m) of debt related to its acquisition of Whyte & Mackay.
United Spirits' parent entity, UB Group, is currently enduring a turbulent period in India, predominantly due to the financial difficulties of its aviation wing, Kingfisher Airlines. Kingfisher is facing legal action by Indian tax authorities and is believed to need outside investment to avoid potential collapse.
There has been speculation that UB Group's owner, Vijay Mallya, will need to sell non-core assets. As yet, both United Spirits and United Breweries have not been directly affected.
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