Friday, January 18, 2013
Suzlon Energy gets lenders' nod for Rs 14,000 crore debt recast
MUMBAI: Lenders of Suzlon Energy Ltd have approved the loss-making wind turbine maker's proposal to recast its Rs 14,000-crore debt, giving a breather to the company which has been reeling under the impact of slowdown in business and high debt burden.
People close to the development told ET that lenders have approved the debt recast on the condition that Suzlon gets a capital infusion of Rs 250 crore now and another Rs 500 crore over the next 18 months.
"The promoters will have to pump in fresh capital. The company has agreed to sell some of it non-core assets to meet the demand of the banks," a banker close to the development said.
The lenders have lowered interest rate on loans to around 11% from 14% earlier. They have also agreed to a moratorium period of two years on payment of both interest and principal.
Responding to a query from ET, Suzlon said, "We will be making an announcement on this in due course as the formalities are completed."
Although some of the smaller lenders to Suzlon Energy seem to have indicated that it should sell stake in its German subsidiary, Germany's REpower Systems. The company has repeatedly said that the subsidiary is a 'jewel in the crown' and critical for its growth.
"Our big lenders understand that REpower is important for our growth. We would not want to sell stake in it or use their cash to repay debt since it is growing at a very fast pace and would require investments. REpower's cash would be used to finance its own growth," a senior Suzlon executive told ET recently.
Suzlon, which has piled up Rs 14,000 crore in debt - almost twice its equity base - has reported losses for the past three years. Last year, the company defaulted on a $209-million foreign currency convertible bond repayment.
Suzlon, like other wind energy equipment makers, is hit by a slowdown in the sector. But the company's financial stress has been aggravated due to its mounting debt, raised primarily to finance the acquisition of REpower Systems.
Eighteen banks and financial institutions, including State Bank of India, ICICI BankBSE 1.14 %, Axis BankBSE -1.45 %, IDBI BankBSE -0.66 %, Yes BankBSE -0.54 % and Power Finance CorporationBSE 1.93 %, are involved in the debt recast. State Bank of IndiaBSE 1.00 % has the highest exposure of Rs 1,804 crore. SBI Capital Market is advising Suzlon on the debt recast.
Highly-leveraged companies, with muted cash flows, have been seeking debt recast to reduce their repayment burden. Banks have turned cautious while allowing companies to recast loans as they face rising bad loans and restructurings estimated at Rs 3.25 lakh crore.
Courtesy: Economic Times