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Bond Defaulter Suzlon Hires Banks for Sale of Notes

Suzlon Energy Ltd., the Indian wind turbine maker that failed to repay convertible debt last year, plans to raise $650 million selling five-year bonds, according to a person familiar with the matter.

Suzlon, based in the western Indian city of Pune, hired JPMorgan Chase & Co. and SBI Capital Markets Ltd. to manage the sale, the person said, asking not to be identified because the terms aren’t set. The planned bonds will be backed by standby letters of credit from banks, the person said.

“As a matter of policy, we don’t comment on market rumor or speculation,” a spokesman for Suzlon said in an e-mail today.

India’s largest wind-turbine maker needs money to repay foreign creditors and boost equity capital under its liability-restructuring agreement with lenders. Suzlon’s founders sold part of their holdings last month and the firm plans to sell “non-critical” assets including China unit Suzlon Energy (Tianjin) Ltd. to raise money after international bondholders rejected a request for an extension on payments.

Suzlon’s shares fell 0.6 percent to 16.9 rupees in Mumbai, the lowest since Feb. 28. The stock has fallen 8.9 percent this year versus a 1.3 percent rise in India’s benchmark stock index.

Suzlon’s 2016 notes tumbled to an all-time low of 35 cents in October, when it failed to repay $209 million in India’s biggest convertible-bond default. The company reported a loss of 11.56 billion rupees ($212 million) for the last quarter of 2012 as dwindling working capital reduced its ability to complete orders.

Bank Yields

“If the bonds are backed by letters of credit, investors are effectively taking a risk on Indian banks rather than Suzlon,” Hemant Dharnidharka, the Bangalore-based head of credit research at SJS Markets Ltd. said in a phone interview today. “So the yields on the planned bonds will be somewhat similar to the yields of these banks.”

Investor meetings for the planned bond sale will be held as early as next week and the company may start marketing the debt later this month, the person familiar with the matter said. Proceeds from the sale will be used to repay earlier U.S. dollar-denominated loans, the person said.

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