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Suzlon Posts Fourth Straight Quarterly Loss, Hurt by Debt Burden

Suzlon Energy Ltd., the wind-turbine producer behind the biggest Indian convertible bond default, reported its fourth consecutive quarterly loss as the debt burden and cash shortfall at the company hurt operations.

India’s biggest maker of the machines had an 8.1 billion-rupee ($148 million) loss in the fiscal second quarter ended Sept. 30, compared with a 480 million rupee-profit the year earlier, it said in a statement. It missed the 3.3 billion-rupee loss median estimate of six analysts surveyed by Bloomberg.

“The first half of the financial year has been disappointing,” Chief Financial Officer Kirti Vagadia said in a phone interview. Working capital limitations and debt management issues meant “sub-optimal” cash was allocated to operations.

Suzlon plans to complete a proposed 107 billion-rupee debt restructuring and a deal with bondholders within the next four months, Vagadia said.

The company defaulted on $209 million of foreign-currency convertible notes on Oct. 11 after bondholders rejected its request for a four-month extension. That delinquency could potentially trigger creditor demands for immediate payment of other loans and bonds because of cross-default clauses.

“To date, I have not received a statutory note from any lenders,” invoking that right, Vagadia said. Suzlon is in dialog with 80 percent of its bondholders after the default, according to an investor presentation released today.

Debt Restructuring

As part of its debt-restructuring proposal, Suzlon has requested $400 million of working capital facilities, it said today. Approval of that package would “provide the liquidity we require to first stabilize and then improve our business,” Chairman Tulsi Tanti said on a conference call with analysts.

German unit Repower Systems SE is “debt-free” and the parent has no plans to tap its cash to pay off debt, Vagadia said. “Repower is on a growth path and we prefer to use its cash to fund its business,” the CFO said.

Total group debt rose 31 percent to 136 billion rupees, while cash fell 57 percent to 9.64 billion rupees, according to the investor presentation.

Net sales rose 12.4 percent to 57 billion rupees, the company said. Its order book stood at $6.8 billion as of Nov. 9 after signing 1,070 megawatts of new contracts in the quarter.

Suzlon filed a lawsuit in September against a unit of Edison International to recoup a $217 million payment by February for turbines supplied to an Illinois wind farm in 2009. Edison disputes that Suzlon has satisfied the conditions for payment, Edison spokesman Douglas McFarlan said on Sept. 28.

Vagadia declined to comment on when a ruling is expected. If the court doesn’t order an earlier resolution, the latest that Edison can delay payment is October 2014, he said.

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