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CDR hits R50k cr on Suzlon debt

Cell receives nine cases worth Rs 14,100 crore in October; DCHL case withdrawn.

With wind turbine manufacturer Suzlon Energy?s debt of around R10,500 crore being referred to the corporate debt restructuring (CDR) cell, the debt recast body now has its hands full. Nearly R50,000 crore worth of proposals, across 83 accounts, are being looked at by the cell.

CDR cell received nine new referrals worth R14,100 crore in October, says a banker close to the development. The first meeting of empowered group of the corporate debt restructuring (CDR) cell will meet on November 8 to take up the Suzlon case. The empowered group consists of representatives from the lenders to the company who will assess the report of the company and vote on whether to introduce the account to the CDR cell.

October also saw a high profile exit from the CDR mechanism. The debt-hit media company Deccan Chronicle Holdings (DCHL) was withdrawn from the CDR cell, after ICICI Bank along with another key lender Axis Bank pulled out from the R4,100-crore debt recast.

CDR cell is an informal forum of lenders that help debt-hit companies tide over difficult times with easier loan terms. A CDR cell restructuring requires that 75 % of lenders by value and 60% by number agree to the recast.

The main lenders to Suzlon includes the lead lender SBI with an exposure of around Rs 3,500 crore, IDBI Bank at R1,700 crore and Bank of Baroda at Rs 1,000 crore. Some of the other lenders to the group include ICICI Bank, Axis Bank, and Yes Bank, though it?s unclear about the extent of their exposure.

On October 29, the company in a release said it had initiated discussions with its senior secured lenders and plans to restructure its debt with a maturity period of ten years under the CDR mechanism, including a two-year moratorium on principal and interest payments on term-debt. The debt restructuring proposal comes in light of Suzlon’s foreign currency convertible bonds (FCCB) holders rejecting its request to extend the time for the redemption of FCCBs of $221 million due to mature in October.

As of June, Suzlon reported debts to the tune of R13,000 crore, of which foreign currency convertible bonds (FCCBs) contributed around R3,500 crore. Bankers say it?s still unclear whether the FCCB holders will decide to become part of the restructuring exercise or to pursue a winding up petition against the company. Suzlon has been under pressure due to a slowdown in global turbine sales and growing debt. For the financial year 2011-12, the company posted revenues worth R21,082 crore with a net loss of R479 crore.

The Reserve Bank of India (RBI) on Tuesday had decided to increase the provisions for restructured standard accounts from the existing 2% to 2.75%. New RBI guidelines on restructured assets, which has taken into account the recommendations of a committee headed by RBI ED B Mahapatra, is expected to be released later this financial year.

The panel has recommended that promoters must make a bigger sacrifice to the tune of 15% of the fall in fair value or 2% of the restructured amount, whichever is higher. The RBI group also feels the conversion of loans into preference shares of the company should be done only as a last resort and conversion of the part of loan into preference shares must be capped at around 10%. According to ratings agency Crisil?s estimates, the loans restructured by Indian banks will stand at R3.25 lakh crore in financial year 2012-13. The majority of restructuring will be in loans to the state power utilities (SPUs), and the construction and infrastructure sectors.

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First published on: 02-11-2012 at 02:13 IST
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