According to reports, Suzlon Energy Ltd. (SUEL)’s convertible bonds are falling at the fastest pace since 2009 after India’s biggest wind-turbine maker signaled it will fall short of funds to repay debt maturing this year.
Prices on the $35.6 million 7.5 percent notes due in June fell 16 percent this month, driving yields up by 82 percentage points to 119 percent, according to indications from Nomura Holdings Inc. The debt fell 5 percent, lifting the yield to 82.3 percent, prices from Sun Global Investments Ltd. show. Quotes from Citigroup Inc. show a yield of 74.95 percent. Yields on the 2013 non-convertible bonds of Korea’s Unison Co. slid 15 basis points to 7.6 percent, data compiled by Bloomberg show.
Suzlon is exploring options including asset sales to meet $569 million in bond redemptions this year as losses widen, Chairman Tulsi Tanti said Feb. 13. Indian companies may default on 20 percent of $7 billion in dollar-denominated convertible bond payments due in 2012, according to Fitch Ratings, as the slowest economic growth since 2009 erodes earnings.
“Suzlon has indicated they don’t have the money to repay the bonds and that they are exploring alternatives which to us as investors is a bad sign,” Raj Kothari, a London-based convertible-debt trader at Sun Global Investments, said in an interview yesterday. “When they raise a question about being able to repay in June, then there’s definitely a cloud of doubt over whether they’ll come through in October.”
The Pune, India-based company may face a slowdown in orders due to the sovereign-debt crisis in Europe, where it gets more than 50 percent of its contracts, according to Mumbai-based Alchemy Share & Stock Brokers Pvt. Wind turbine makers worldwide are struggling with narrowing margins after reducing prices to compete for orders as U.S. and European governments cut clean- energy incentives to curb budget deficits.