According to reports, Suzlon Energy Ltd, the world’s fifth largest wind turbine maker, has initiated discussions with lenders to restructure its debt.
Suzlon, which had a debt of Rs.13,017 crore at end-June, also decided to suspend its guidance for this fiscal, saying that despite strong fundamentals and a $7.2 billion order book, liquidity constraints, a volatile market and the debt recast will hurt performance.
It had earlier forecast a revenue of Rs.27,000-28,000 crore for fiscal 2013 and a margin on earnings before interest and tax of 6%.
“The company has, in consultation with its senior secured lenders, taken the decision to undertake a debt restructuring exercise under the CDR (corporate debt restructuring) mechanism,” chief financial officer Kirti Vagadia said in a statement on Monday. “Our senior secured lenders are supportive of our long-term business plans, and our efforts to consolidate our overall debt to achieve a sustainable capital structure.”
This will help Suzlon enhance liquidity and inject additional working capital, he said.
Suzlon, which has lost money for three years, failed to repay $209 million (Rs.1,124 crore) of debt on 11 October after bondholders rejected its request for a four-month extension. The default was the biggest on convertible bonds by an Indian firm.
“CDR is the last lifeline for the company. Its unit has got quality assets but mother ship is sinking. Nevertheless, CDR is a bright spot. There were many precedents where many debt-trapped companies had found fresh lease of life,” said a consultant, requesting anonymity.
In a related development, lenders led by State Bank of India (SBI) are seeking to acquire loans made to Suzlon’s German unit, REpower Systems SE, which will enable the wind-turbine maker to access cash at the business, said three people with knowledge of the matter.
The terms of the €750-million ($967 million) loan made to REpower this year prohibit Suzlon from tapping the Hamburg-based unit’s cash or drawing on credit available to the business, two of the people said, asking not to be identified as the information is private. The SBI-led group plans to change those terms after acquiring the loan, the people said.
Access to REpower’s cash will also help the Pune-based company address its debt.
REpower’s cash balance was about $163 million, said Antoine Bourgault, a London-based analyst at ISM Capital Llp, citing data provided by Suzlon. The German unit also has $163 million of debt, which may or may not have to be redeemed, according to him.
The terms of the loan that prevent Suzlon from tapping the funds haven’t changed, said Verena Puth, a spokeswoman at REpower and declined to provide the unit’s stand-alone cash balance or total debt. Citing a quiet period, a spokesman at Suzlon declined to comment on the status of the loan. An SBI spokesman did not reply to an email seeking comment. “We are looking at ways to resolve the issue and need time to sort this out,” SBI deputy managing director Santosh Nayar said on 11 October.
The €750-million loan to REpower was made by a group led by BayernLB Holding AG, Commerzbank AG and Deutsche Bank AG, the firm said in March. Thirteen banks and credit insurance firms took part in the loan, which comprised a €725 million letter of guarantee and a €25 million credit facility, according to a 1 March statement.