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Banks may consider Suzlon’s Rs 140 billion debt recast

According to reports, with foreign currency bond holders of Suzlon Energy Ltd rejecting its request for a four-month extension of the deadline for repayment, lenders may face the prospect of recasting the loans given to the company.

Banks have a loan exposure of about Rs 14,000 crore to Suzlon and it is overleveraged, say bankers. Currently, Suzlon Energy is classified as a standard asset in banks’ books.

Suzlon Energy’s $200 million Zero Coupon Convertible Bonds and $20.8 million (7.5 per cent) Convertible Bonds are due for repayment this month.

State Bank of India has a fund-based exposure of Rs 1,000 crore and non-fund based exposure of about Rs 2,500 crore, said S.B. Nayar, Deputy Managing Director, SBI.

“Suzlon has said that it will not be able to meet the bondholders’ commitment… So, we are discussing with the system (other banks) as to how to deal with the situation,” said Nayar.

The top official observed that banks, among others, will have to look at Suzlon Energy’s cash flows in the next one year and the assets that can monetised.

Last month, Suzlon, in a statement said bondholders were requested for a four-month extension of October foreign currency bonds to allow the company to close various financing measures and drive alignment between all stakeholders on allocation of cash resources.

The company then said that it is “engaging constructively with banks and bondholders after the successful redemption of June FCCBs”.

In a statement, Kirti Vagadia, Chief Financial Officer – Suzlon group, said the bondholders’ meeting did not achieve the consensus and the extension sought for had not been granted.

In June, Suzlon had sought for and obtained a 45-day extension for repaying another series of foreign currency bonds totalling $ 360 million. The company redeemed these bonds on July 27 through a combination of instruments, including the sale of some assets, internal accruals and new facilities from its lenders.

Nayar explained that if the bond holders (unsecured creditors) file a winding up petition against the company and it is carried to its conclusion, the unsecured creditors will still remain unsecured.

“(Even) if they (bond holders) go for winding up, secured creditors will get priority. Normally, what happens in such cases is that the company and unsecured creditors try to arrive at a settlement or roll-over their liabilities,” he said.

Bankers say Suzlon Energy could come out of the tight spot by merging its cash-rich European subsidiary, REpower Systems SE, with itself. This move could give it access to the cash. But the merger should be agreeable to the German banks which have given loans to REpower.

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