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Suzlon Borrows to Repay $360 Million U.S. Dollar Debt

Suzlon Energy Ltd. (SUEL), India’s biggest wind turbine-maker, today paid $360 million to redeem its U.S. dollar-denominated convertible bonds, Chief Financial Officer Kirti Vagadia said.

The company borrowed $300 million from lenders including State Bank of India, according to a person familiar with the matter. Suzlon received the 18-month facility from 11 banks and is paying interest of 350 basis points more than the London interbank offered rate, the person said, asking not to be identified because the details are private.

Suzlon, after three consecutive years of losses, is seeking to pay down debt and boost orders amid heightened competition and an industry supply glut. A cash-crunch at the Pune-based company prompted it to ask investors this year for a 45-day extension on the notes originally due June 12.

Suzlon is “not out of the woods yet,” said Charanjit Singh, a Bangalore-based analyst for HSBC Bank Plc. The length of the loan is critical to the company, which has about $700 million of obligations to meet in the year ending March 31, 2013, including today’s repayment, and $250 million more the following financial year, he said.

The company redeemed the debt “from the sale of non- critical assets, internal accruals and the new facilities from our senior secured lenders,” Vagadia said an e-mailed statement, without giving details of the company’s transaction with the banks.

Suzlon has fallen 68 percent this year making it the third- worst performing stock on the BSE 200 index. It dropped 0.6 percent to 17.15 rupees in Mumbai today.

Debt Maturities

Having to repay the $300 million loan before the end of the next financial year in March 2014 could “raise the risk of a default,” HSBC’s Singh said. The global wind market’s decline, as European and U.S. governments roll back clean-energy subsidies, will intensify pricing and margin pressure for Suzlon, which has seen its market share in India drop to 35 percent last year from 49 percent in 2009, he said.

The company has $2.7 billion of bonds and loans maturing before the end of 2017, including the equivalent of about $922 million in revolving facilities, according to data compiled by Bloomberg. This year, it began principal repayments on 106 billion rupees ($1.9 billion) of bank loans refinanced in 2010 after struggling with debt taken on to buy its German unit Repower Systems SE and a Belgian gearbox maker.

Convertible Bonds

Suzlon’s foreign-currency bonds redeemed today include $307 million of zero-coupon debt and $53 million of 7.5 percent notes, according to data compiled by Bloomberg. It has another $209 million of convertible bonds maturing in October, the data show.

Other lenders to the $300 million loan are Bank of Baroda, Central Bank of India, ICICI Bank Ltd., IDBI Bank Ltd., Indian Overseas Bank, Oriental Bank of Commerce, Punjab National Bank, State Bank of Bikaner & Jaipur, State Bank of Patiala and Yes Bank Ltd., the person familiar with the matter said today. State Bank of India (SBIN) Capital Markets acted as the lead arranger, the company said.

Suzlon reported a fourth-quarter loss of 3 billion rupees on May 25 as sales declined and finance costs increased. It’s scheduled to report first-quarter results next month.

To contact the reporters on this story: Anurag Joshi in Mumbai at ajoshi53@bloomberg.net; Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net

To contact the editors responsible for this story: Shelley Smith at ssmith118@bloomberg.net; Reed Landberg at landberg@bloomberg.net

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