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Suzlon to raise $650 m in $ bonds to retire debt

According to reports, as part of its debt restructuring package, the beleaguered Suzlon Energy will raise $650 million via five-year dollar-denominated bonds, backed by a consortium of lenders. The proceeds of the bond issue will be used to repay a maturing dollar loan. In January this year, the Pune-headquartered wind energy firm was able to convince bankers to allow it to recast its debt. The consortium of 19 banks had approved the R11,500-crore loan bailout package.

The debt-laden company is looking to refinance a loan of about $650 million. However, given that its finances are in a shambles, the bond issue is being backed by State Bank of India (SBI) and other lenders. While SBI has an exposure of around R3,500 crore, IDBI Bank has lent the firm around R1,700 crore, Bank of Baroda R1,000 crore and Indian Overseas Bank R1,000 crore.

Some of the other lenders to the group with smaller exposures include ICICI Bank, Axis Bank and Yes Bank.

The debt restructuring was approved after bondholders rejected a request by the company to extend the deadline for repaying foreign currency convertible bonds (FCCB) worth $221 million due in October 2012. Suzlon has forex facilities with SBI and 11 other banks across the geographies where it operates of around $650 million. These loans are due to mature over the next year or so and lenders believe it might be better to refinance the amount with a single-bullet payment instead of making staggered payments. Although Suzlon is nearly bankrupt, the bonds are expected to be nonetheless rated BBB- since they are being backed by lenders, investment bankers say.

The appetite for Indian paper has been fairly high given the abundance of liquidity globally; between January and now, nine Indian companies have raised close to $5 billion, from the overseas bond market at coupon rates that are lower by 125 to 150 basis points compared with those eight months back. “Indian spreads have been tightening as the news flow from India has been more positive than negative. Foreign currency bond issuance has been above expectation and between January and March close to $2.25 billion issuances were done by first time issuers,” said Jujhar Singh, MD and head of debt capital markets at Standard Chartered Bank.

First time issuers include HDFC Bank and Bharti Airtel, which picked up $500 million and $1 billion, respectively, with both the issues being oversubscribed over nine times. Bharti Airtel’s issue, priced at 5.13%, is currently trading at around 5% in the secondary market. Singh expects Indian issuers to raise as much as $17-18 billion this year, way above the $10 billion raised in 2012. SBI said recently it might hit the market for $500 million to $1 billion before March end.

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