According to some media reports, Suzlon Energy Ltd’s lenders were scheduled to meet at Mumbai on Saturday to discuss the proposed terms of corporate debt restructuring (CDR) of the wind energy major. The 21-bank consortium will deliberate on the various aspects of the debt restructuring plan before a final CDR package is submitted to the CDR cell, sources in the banking industry said. The proposed terms will include restructuring debt at Suzlon level, working capital enhancement to support business plans and shifting of servicing of overseas loans to REpower balance sheet.
Currently, the Suzlon Group cannot access the cash flows at REpower on account of tight ring-fenced financing by German banks. The cash flows can be accessed only after ring-fencing is removed.
As for restructuring debt at Suzlon level, the proposals on the table include extending tenor of existing facilities to 10 years (2+8) from existing repayment profile of 3-6 years. Also, reduction of interest rates to 11% from 14-15 % will be discussed.
Suzlon Energy is understood to have a debt of about Rs.10,850 crore, which is now sought to be restructured. Bankers are also likely to discuss enhancement of fund-based working capital by Rs.500 crore and non-fund based working capital by Rs.1,500 crore.
According to media reprots, Suzlon Energy Ltd’s lenders have asked its promoter to bring in Rs.250 crore in two equal installments if they are to restructure the company’s debt. Even as its debt recast proposal under the corporate debt restructuring mechanism has been approved, lenders also want Suzlon to sell its non-core assets and realize receivables from debtors, said a banker clued in to the development.
Suzlon’s problems on repaying its debt are because of the delay in getting $206 million ($20.6 Cr, 1$=Rs.54.47) from the US-based wind energy company Edison Mission and delay in sale of its wholly-owned Chinese subsidiary Suzlon Energy (Tianjin) Ltd to China Power (Tianjin) New Energy Development Ltd (deal size $60 million).
Further, the wind turbine manufacturer is facing delay in getting cash from German subsidiary REpower. This is because REpower’s cashflows have been ring-fenced by German lenders. However, all these things do point out that Suzlon Ltd is probably out of the woods and is now ready to surge ahead.
I am looking at a price target of Rs.31-32, within the next few trading weeks.