Foreign currency convertible bonds will not be part of debt restructuring
Suzlon Energy’s lenders have decided to restructure loans of R11,000 crore through the corporate debt restructuring (CDR) mechanism. Both State Bank of India (SBI) and IDBI Bank, the second largest lender to the Pune-based firm, seem to have agreed to a recast. The CDR cell typically requires 75% of banks (by value) and 60% of them (by number) to agree to a restructuring.
Finer details are expected to be worked out a meeting to be held next week but the company’s foreign currency convertible bonds (FCCB) will not be a part of the debt restructuring package, though lenders will factor in these liabilities.
Suzlon had earlier initiated discussions with its senior secured lenders and hopes to restructure its debt with a maturity period of ten years under CDR mechanism, including a two-year moratorium on principal and interest payment on term-debt. Bankers say the package will most likely involve additional lending to the company. Also, Suzlon chairman and managing director Tulsi Tanti is likely to bring in about R250 crore as promoter capital.
The main lenders to Suzlon are SBI with an exposure of R3,500 crore, IDBI Bank R1,700 crore, Bank of Baroda R1,000 crore and Indian Overseas Bank R1,000 crore. Some other lenders to the group with smaller exposures include ICICI Bank, Axis Bank, and Yes Bank.
The debt restructuring proposal came after FCCB holders rejected Suzlon's request to extend the time for redemption of FCCBs of $221 million due to mature in October. Suzlon had hoped that the extension would have given it time to sell more assets and attempt to collect receivables. However given that the extension has not been granted, Suzlon has defaulted on the redemption of these bonds.
Suzlon has been under pressure due to a slowdown in global turbine sales and growing debt. In 2011-12, the company posted revenues worth R21,082 crore with a net loss of R479 crore. As of September 30, 2012, Suzlon reported debt of R13,200 crore, of which foreign currency convertible bonds (FCCBs) contributed around R3,500 crore. The company posted revenue to the tune of R659.27 crore in the July-September 2012 quarter and posted a net loss of R546.33 crore.
The recast terms
* Final shape of recast package is being worked out
* It will most likely involve extra lending to Suzlon
* FCCB holders will not be a part of restructuring package