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Suzlon Energy Can’t Tap Repower Unit’s Loan to Repay Debt

According to reports, Suzlon Energy Ltd. (SUEL), India’s largest wind-turbine maker, won’t be able to tap a 750 million-euro ($980 million) loan raised by its German unit Repower Systems SE to repay debt maturing this year.

The loan agreement with banks led by BayernLB Holdings AG, Commerzbank AG and Deutsche Bank AG doesn’t allow Repower to pass those funds to its parent Suzlon, Repower spokeswoman Caroline Zimmermann said in an e-mail.

“There won’t be any upstreaming to Suzlon,” Zimmermann said today. “This is not possible in the contract.”

Suzlon may face as much as $569 million in bond redemptions starting in June should investors holding foreign currency convertible notes choose not to swap them for shares. Pune-based Suzlon had its biggest one-day jump in more than a year on March 1 when Repower announced the loan as investors assumed that the funds would help cover repayments.

Prices on Suzlon’s 5 percent convertible debt due 2016 in April fell 3.1 percent today, reversing four days of gains, according to pricing data from Barclays Plc. The yield rose by 5.4 percentage points. Suzlon’s shares slid 3.8 percent today.

“This is bad for us investors,” said Raj Kothari, a London-based convertible bond trader at Sun Global Investments Ltd., which owns Suzlon bonds. “The only way out may be to sell Repower cheaply.”

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