According to reports, Indian wind-turbine producer Suzlon Energy has announced its credit-enhanced US dollar bond, confirming plans first reported by IFR earlier this month. The JP Morgan-led deal is set to be priced later this week.
The five-year Reg S issue will have the backing of a standby letter of credit from joint lead manager State Bank of India, which, in turn, is backstopped by 11 other Indian banks with lending links to Suzlon. The 11 are Yes Bank, ICICI Bank, IDBI Bank, Bank of India, Bank of Baroda, Central Bank of India, Indian Overseas Bank, State Bank of Patiala, State Bank of Bikaner and Jaipur, Punjab National Bank and Oriental Bank of Commerce.
The issuer does not have an international rating, but the issue is expected to have a similar credit score to State Bank of India at Baa3/BBB–/BBB–, due to the SBLC backing.
The structure is similar to the one JP Morgan used to help South Korean infrastructure company Doosan Heavy Infracore raise dollars in the bond market last year. That bond had the backing of a SBLC from three of Doosan’s lenders.
Much like that deal, the leads are expected to push pricing on the Suzlon bonds to a small premium over SBI’s own debt, given that investors will ultimately be taking SBI credit risk.
Suzlon intends to raise US$600m–$650m from the deal to repay a maturing US dollar loan, and is heard to be paying a fixed fee of 1.25% for the SBLC.
The deal marks the latest part of a restructuring for debt-laden Suzlon, following the completion of a corporate debt restructuring agreement earlier this year with 19 banks.
The CDR package involved Rs95bn (US$1.74bn) of onshore debt. According to the terms, the issuer will have a 10-year repayment plan and reduce its interest rate on the local bank debt to 11% from 14%. It also got a two-year moratorium on interest and principal payments and enhanced working capital facilities of Rs18bn. The interest accumulated during the moratorium period will be converted into equity of Rs25bn over time, as well.
The company, however, is still bleeding cash. In February, it reported a net loss of Rs11bn as sales dropped 19.6% year on year. To be sure, part of the reason for the loss was the company’s high interest costs, which should be mitigated as the CDR package terms and the new bond kick in.