Suzlon Seeks Debt Extension as Dutch Supplier Claims Dues

Suzlon Energy Ltd. (SUEL), the wind turbine-maker that will seek a four-month delay on bond repayments today, is behind on funding a Dutch supplier as a cash crunch hampers its ability to carry out orders.

Suzlon owes 1.49 million euros ($1.9 million) to Multi-Fix Group BV for studs and nuts bought to attach blades to turbines, according to a list of invoices, about half dating back to 2011, that was provided by the supplier based in Bergeijk, Netherlands.

Multi-Fix, which relies on Suzlon for 5 percent of its sales and also supplies General Electric Co. and Japan Steel Works Ltd. (5631), is preparing to sue the company to recover its dues, Multi-Fix Chief Executive Officer Arthur Burgmans said in a phone interview on Oct. 1.

“The matter under discussion refers to an ongoing contract between the two parties and therefore remains commercially confidential,” Suzlon said in an e-mail response to questions about the dispute.

Suzlon, which has posted losses for three years, is under pressure to raise cash. A lack of working capital constrained its ability to complete orders in the quarter that ended June 30, Chief Financial Officer Kirti Vagadia said after the company reported its second-biggest quarterly loss since at least 2007.

Suzlon shares fell as much as 3.8 percent and last traded at 16.60 rupees in Mumbai. The stock has declined 7.5 percent this year, compared with a 21 percent gain in the key Sensitive Index.

Bondholders Vote

Today, bondholders vote on whether to grant Suzlon’s request for postponing the redemption of $220.8 million of convertible bonds by four months to Feb. 11, the second time it’s sought an extension this year. The company needs time to raise funds from various sources, including fresh debt and the sale of non-critical assets, according to a Sept. 18 statement.

The Pune-based manufacturer needed a 45-day extension to avert default in June when it redeemed $360 million of convertible notes. The bonds were repaid on July 27 after Suzlon borrowed $300 million from banks and sold two Indian wind farms.

A global supply glut has depressed turbine prices by 23 percent from their peak in 2009, while the loss of government incentives in India may cause order deferments in Suzlon’s home market, according to Batlivala & Karani Securities India Pvt.

Rising Yield

The yield on Suzlon’s 2016 debt rose 35.7 basis points to 35.4 percent today, its highest since Sept. 27, according to pricing data compiled by Bloomberg. It has surged 9.3 percentage points this year, compared with 4.9 percent for similar-maturity debt in Denmark’s Vestas Wind Systems A/S. (VWS)

E-mail exchanges between Multi-Fix and Suzlon executives, including Vagadia, indicate that Suzlon tried to pay about 212,000 euros to Multi-Fix on Oct. 1. The transfer was rejected by Multi-Fix’s bank.

Burgmans said he is having trouble paying his own suppliers because of the delays in collecting from Suzlon.

“We called them 100 times, and we also sent someone to India to try to get payment,” Burgmans said. “Now we have a lawyer working on a winding-up petition if they don’t pay.”

The 41 outstanding invoices provided by Multi-Fix are for receivables largely over the past 12 months from Suzlon units in India and Brazil. One dates to Feb. 19, 2009.

Suzlon last month filed its own lawsuit against a unit of Edison International (EIX) for disputing the February due date for payment of turbines supplied to an Illinois wind farm. Suzlon hasn’t satisfied the conditions necessary to trigger payment in February, Edison spokesman Douglas McFarlan said in a Sept. 28 e-mail.

To contact the reporters on this story: Alex Morales in London at amorales2@bloomberg.net; Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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