According to reports, State Bank of India , which has a Rs 3,500-crore of fund and non-fund based exposure to Suzlon Energy, today said the Pune-based wind power major should look at leveraging the balance-sheet of its German subsidiary RE Power, and a merger.
“Suzlon needs to leverage the RE Power balance sheet and probably in the long-run, merge these two operations. Because when they merge, the profitability of the whole group can go substantially higher using low-cost of production here,” SBI deputy managing director, large corporates, Santosh B Nayar told reporters here.
Noting that RE Power is practically debt-free and has got huge cash pile, he said the German arm is also ring fenced by German banks. SBI is lead banker to Suzlon’s Rs 14,000-crore debt. The Pune-based company is also reportedly pitching for a debt recast, but SBI has ruled it out in the short-term.
“We will have to discuss with the company on CDR; we will have to look at their cash flows now and we will see what needs to be done and also see what are the assets which can be monetized,” Nayar said.
Earlier in the day, Suzlon said its bondholders rejected its proposal to defer redemption of its foreign debt worth USD 221 million by four months, making it one of the largest defaults by a domestic firm. The Tulsi Tanti-promoted company has foreign currency convertible bonds (FCCBs) worth USD 220.8 million (about Rs 1,172 crore) maturing today and the company was hoping to get bondholders’ nod for more time to repay.
Following the development, Suzlon shares fell over 3 per cent to Rs 16.05 on the BSE. “It is somewhat disappointing that the bondholders’ meetings did not achieve the consensus we were hoping for and the four-month extension sought by us has not been granted,” Suzlon Group chief financial officer Kirti Vagadia told PTI.
Nayar further said the current default by Suzlon is not very big when one looks at the company’s total debt profile. But the real problem can be from the fact that the company will have to negotiate with other bondholders and arrive at a settlement, which could impact its cash flow, he said.
Noting that the company has got a very large order book (over USD 7.2 billion), he said wind energy is a field where a lot of investors are interested. If the finances are set right, Suzlon could attract other investors. Many domestic companies including Suzlon have raised money through FCCBs. In recent times, Suzlon has been grappling with rising debt and stiff competition in global markets.
Suzlon had issued USD 200 million zero coupon convertible bonds and USD 20.8 million 7.5 per cent convertible bonds. The company on September 18 had sought extension them. The bondholders’ meeting was held in London yesterday.
“We did not have enough quorum (of bondholders) with respect to the zero coupon convertible bonds while the response was not positive when it came to those holding 7.5 percent convertible bonds,” Vagadia said. The company had redeemed FCCBs to the tune of USD 360.2 million this July.