GVK Power & Infrastructure Ltd is reportedly in talks to buy two coal mines of an Australian company, Hancock Prospecting Pty.
The company will pay about $1.5 billion for Hancock’s Alpha Coal and Kevin’s Corner mines, with the balance to be paid in the next few years, two people familiar with the matter said on April 6.
A Bloomberg report that appeared in local media here quoted two people who said the company was in talks to borrow as much as $850 million to fund the purchase of two mines.
It was said out of the borrowed funds, GVK will earmark $500 million towards paying Hancock as equity and another $350 million as compensation for the costs incurred by the Australian company on running them, the sources said on condition of anonymity, because the discussions are private.
Banks may charge GVK about 425 basis points above the London inter-bank offered rate, or LIBOR, according to one of the people. A basis point is 0.01 percentage point.
Mr Manish Kalghatgi, a spokesman for the Indian billionaire G V Krishna Reddy-controlled company based in Bangalore, declined to comment.
GVK Power is seeking overseas coal supplies to help fuel power plants at home after its shares fell 45 per cent in Mumbai over the past year.
The company is in talks with investors, including 3i Group Plc and Actis LLP, to help finance the acquisition, according to a source.