Post-default, Suzlon Energy gets relief as lenders agree to Rs 11,000 cr debt recast
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The world's fifth largest wind turbine maker, which had last month defaulted on the redemption of its USD 221 million foreign currency convertible bonds (FCCBs), had a fully secured gross debt of Rs 14,568 crore on its book as of the July-September quarter, taking its debt to 4 times the equity.
At the end of the quarter, its net debt stood at Rs 13,604 crore and a cash balance of Rs 964 crore, according to the balance sheet statement.
"The lenders led by SBI have agreed to consider our Rs 11,000-crore CDR proposal and we hope to conclude the deal in the next few months," a top Suzlon official said on the condition of anonymity.
SBI could not be reached for comments, nor SBI Caps which is drafting the CDR plan.
Most of the 20 lenders to the debt-laden Pune-based company are state-run banks and SBI has an exposure of around Rs 3,500 crore.
The other lenders include IDBI Bank, Bank of Baroda, Axis Bank, Punjab National Bank, Indian Overseas Bank, Central Bank of India, Yes Bank, and State Bank of Bikaner & Jaipur among others.
Last month, the SBI had suggested merger of Suzlon's profitable German subsidiary REpower with the group to improve profitability and deleverage its balance sheet.
The Tulsi Tanti-promoted company had sought the debt restructuring process late last month.
The official did not share more details such as the new interest rate on the recast loan, the capital infusion that the promoters have to chip in for the deal, saying that those details will be decided at the next meeting scheduled for next month. Market lapped up the news and shares of the company, which is squeezed by high cost debt and tight working capital, soard 10 per cent to Rs 17.05 on the BSE, whose main gauge Sensex jumped 305 points.
Still, the stocks are trading nearly half the year-high level in February. That too was as much as 96 per cent below the Rs 459.8 peak in early 2008, when the global wind energy sector was booming.
The rupee debt, which is due in 5-6 years, will be recast with a two-year moratorium on interest and principal repayment, after which the loans will be repaid over eight years at a lower rate, the official said.
He added that the loans were taken in the past two-and-a- half years and are being serviced at about 14 per cent interest. He also said the debt is fully secured.
The CDR is unlikely to include its foreign currency debt, but will give the company a much-needed breathing space.
Though the details about the capital infusion by promoters are yet to be worked out, the CDR cell has been demanding a 25 per cent capital infusion, and if accepted, Suzlon will have to pump in Rs 2,750 crore as fresh equity for the deal to be concluded.
The demand from banks for higher equity contribution comes in the wake of rising default on even on the recast loan.
Suzlon is the latest big domestic company to get the CDR approval. Already the number of CDR cases have crossed 100 totalling around Rs 67,000 crore this fiscal.
Recently an RBI committee had proposed that banks make higher provisions against restructured loans and as part of the proposal.
The apex bank had on October 30 credit policy upped the provision to 2.75 per cent from 2 per cent. In two years, the central bank wants all such loans declared non-performing and make banks fully provide for.
Early last month, the overseas bond holders of Suzlon rejected a four-month repayment extension the company sought.
The company official said it has an order book of USD 6.8 billion as of now and has an installed capacity of 20,000 MW and 5,000 MW of under installation.
For the July-September quarter, the company reported higher losses at Rs 807.74 crore, against Rs 48 crore net profit a year ago, as adverse market conditions and capital allocation issues pushed the wind turbine maker into the red.
However, its consolidated income rose to Rs 5,784.39 crore in the quarter, from Rs 5,154.45 crore a year ago.
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