According to reports, Suzlon Energy Ltd. (SUEL) expects to raise as much as $300 million by next month in time to pay bondholders, quelling concerns that India’s biggest wind-turbine maker may be headed for default.
A group of about 20 banks, including SBI Capital Markets Ltd., IDBI Bank Ltd. (IDBI) and Bank of Baroda (BOB) have agreed in principle to extend a dollar-denominated term loan, Vikas Rathee, Suzlon’s vice president and head of corporate finance, said yesterday in an interview in Mumbai.
SBI Capital Executive Vice President Supratim Sarkar said the lender is “extremely confident” of closing the deal in time to ensure Suzlon meets its June bond repayments in full.
Suzlon has $358 million of dollar-denominated convertible notes maturing on June 12. Bondholders are supportive of a 45- day extension Suzlon has requested in case of procedural delays, which won’t result in any penalties, Rathee said.
“This is certainly great news,” Rosita D’Souza, a Singapore-based credit analyst at Elara Capital Plc, said in a phone interview.
D’Souza said the new loan combined with internal cash and $40 million Suzlon got from selling two wind farms in April should allow it to safely meet its obligations this year. In October, another $200 million of convertible bonds mature, Rathee said.
“They should be all right,” D’Souza said. “That’s still awhile away and they have some time and breathing room now to explore other options if necessary.”
That puts to rest concerns that Suzlon might not be able to meet its obligations. HSBC Holdings Plc estimated in March that Suzlon could fall short by as much as $592 million out of $700 million in bonds and loans due in the next 12 months.
Suzlon’s shares closed 0.5 percent higher at 20.1 rupees yesterday at the end of the week’s trading before the announcement. The stock has fallen 62 percent over the past 12 months.
“When we’ve paid these bonds, we’ll be out of the woods,” Rathee said. Suzlon still hopes lenders will disburse the funds by June 10 to avoid an extension, he said.
The new loan will probably be raised by Suzlon’s overseas holding company, AE-Rotor Holding BV, and won’t require posting fresh collateral. Raising the dollar loan overseas will allow Suzlon to better re-balance debt across the group and reduce interest costs, Rathee said.
Suzlon plans to sell new, high-yield bonds later this year, Chief Financial Officer Kirti Vagadia said last month. Suzlon hasn’t appointed bankers yet and is “waiting for the right window,” Rathee said. “The market has to be there.”
Selling a new bond under current market conditions could still be difficult, though paying off the June bond may help renew investor confidence in the company, Elara’s D’Souza said.