Vedanta lines up six billion dollars for Cairn India deal
British resources giant Vedanta said Friday it has lined up six billion dollars in financing to fund the company's controversial proposed purchase of most of Cairn Energy's India unit.
Earlier this week, Scotland-based Cairn Energy said it was seeking the necessary Indian government approvals for the transaction and that it expected to complete the process by the first quarter of next year.
London-listed Vedanta Resources, whose assets already include aluminium, copper, iron ore and zinc mines, announced in August plans to acquire between 51 and 60 percent of Cairn India for 8.5 billion to 9.6 billion dollars.
The financing "provides the group with funding flexibility," said Vedanta chairman Anil Agarwal in a statement, calling the six billion dollars in commitments from international banks "a testament to the strength of the Vedanta story".
The proposed acquisition has run into trouble in India.
Cairn Energy ruffled feathers by announcing its plans to sell the stake in its Indian unit before informing the Indian government or its partner, Indian state-run Oil and Gas Corp (ONGC).
The deal requires the government's nod because it has oil production-sharing contracts with Cairn India, which holds interests in 10 oil and gas blocks in the country and has tie-ups with ONGC, the energy-hungry country's largest oil producer.
Indian-born billionaire Agarwal has said he wants to create an "Indian natural resources champion".
But the Indian government has reservations about the deal as the takeover would mark Vedanta's first foray into the energy field and it is worried about the company's lack of experience, according to the Indian media.
The government has said it expects to announce its decision by the end of the year.
The bank consortium lined up by Vedanta comprises Barclays Capital, Citi, Credit Suisse Group, Goldman Sachs Group, JP Morgan, Morgan Stanley, Royal Bank of Scotland and Standard Chartered.
Cairn Energy has warned India that any attempt to hold up the firm's sale of the stake would send a bad signal to other foreign investors.
Cairn chairman Bill Gammell said New Delhi's handling of the sale would be a litmus test for investors, especially those considering selling Indian operations.
© 2010 AFP