Suzlon Energy Ltd. (SUEL), the wind-turbine maker behind India’s biggest convertible bond default, proposed a restructuring for 107 billion rupees ($2 billion) of bank loans, offering to repay them over a decade.
India’s biggest maker of the machines has begun talks with lenders for a two-year moratorium on interest and principal repayments, the company said in an e-mailed statement late yesterday.
Suzlon, which has posted losses for three years, also suspended guidance for the current fiscal year due to liquidity constraints, volatile market conditions and problems financing its debt.
The company is negotiating separately with bondholders and expects “an acceptable solution will be reached at the earliest possible date,” Chief Financial Officer Kirti Vagadia said in the statement.
Suzlon is struggling to pay down debt it racked up in overseas acquisitions before a global supply glut slashed turbine prices by 23 percent from their peak in 2009, data compiled by Bloomberg show. On Oct. 11, it defaulted on $209 million of convertible notes after bondholders rejected its request for a four-month extension.
In an effort to unlock cash for the company, lenders led by State Bank of India (SBIN) are seeking to acquire loans made to Suzlon’s German unit Repower Systems SE, said three people with knowledge of the matter.
The Hamburg-based unit of Suzlon raised a 725-million euro letter of guarantee and a 25-million euro credit facility from lenders including BayernLB Holdings AG and Commerzbank AG in February.
Terms of that loan prohibit Suzlon from tapping Repower’s cash or drawing on credit available to the unit, two of the people said asking not to be identified because the information is private. The SBI-led group plans to change those terms after acquiring the loan, the people said.
Suzlon and Repower declined to provide the unit’s stand- alone cash balance or debt. A spokesman at SBI did not reply to an e-mail seeking comment.
Repower’s cash balance was about $163 million, said Antoine Bourgault, a London-based analyst at ISM Capital LLP, citing figures provided by Suzlon for the quarter ending June 30. The German unit also has $163 million of debt, “which may or may not have to be redeemed,” Bourgault said.
In 2010, Suzlon refinanced 100 billion rupees of debt accumulated from buying stakes in Repower and Belgium-based gearbox maker Hansen Transmissions. Principal repayments started on those loans after a two-year grace period ended in April. Maturity for the loans was scheduled for 2017. The restructuring plan would push repayment back to March 2023.
Suzlon shares have declined 59 percent in the past year, according to data compiled by Bloomberg. A lack of working capital constrained its ability to complete orders in the quarter that ended June 30, Vagadia said in August after the company reported its second-biggest quarterly loss since at least 2007.
The company is also asking lenders for an injection of working capital and an interest rate reduction as part of its corporate debt restructuring proposal, according to Vagadia.
India’s Corporate Debt Restructuring Mechanism allows viable companies additional time to meet debt obligations. Suzlon’s lenders have 90 days to approve or make changes to the proposal with the possibility of a 180-day extension, according to the program’s rules. If the proposal is rejected as unfeasible, “lenders may start action for recovery of their dues,” according to the program’s website.
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