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Debt recast: Suzlon Energy lenders staring at a haircut

FE Bureau
Suzlon's gross-term debt stood at Rs 8,165 crore as on June 2019, according to an investor presentation

Lenders to the loss-making Suzlon Energy are understood to have met the company management on Monday to discuss the restructuring of their dues of close to Rs 8,000 crore. In the absence of any commitment by investors so far to infuse funds into the wind-energy producer, banks may be looking at a haircut.

The company said in a notice to the stock exchanges on Monday that its debt resolution and revival plans "have never been dependent on any single option". It added it was continuing to work on "significant debt reduction alongside with our lenders".

Earlier this year, banks had received a non-binding offer from Canadian investor Brookfield. However, the deal fell through reportedly because lenders could not agree with the Canadian investor's demand that bankers take a 60%-70% haircut on the debt.

According to bankers, company officials have claimed Brookfield is still interested in a deal, though this could not be verified by FE. The management is expected to meet with bankers again on Wednesday.

Suzlon's gross-term debt stood at Rs 8,165 crore as on June 2019, according to an investor presentation. Of this, Rs 3,917 crore is backed by standby letters of credit issued by domestic lenders. The rupee-term debt is Rs 2,650 crore while foreign currency convertible bonds worth Rs 1,219 crore also form part of these liabilities.

The company's note was in clarification to a report stating the company has withdrawn its offer to repay bankers to the tune of Rs 8,500 crore after Vestas Wind Systems A/C withdrew its offer to purchase a majority stake in the company.

Secured lenders to the company signed an inter-creditor agreement (ICA) in line with the Reserve Bank of India's June 7 circular for resolution of stressed assets, close on heels after the company defaulted on principal payments with respect to foreign currency convertible bonds.

In April, CARE Ratings had downgraded Suzlon Energy's long- and short-term bank facilities to 'D' from 'BB', with a negative outlook on the borrowings. Suzlon Energy, through its wholly-owned subsidiary SE Forge undertakes the manufacturing and machining of large forging and casting products.

Back in 2013, the wind turbine maker underwent debt restructuring with the consortium of bankers approving a recast of the debt under the corporate debt restructuring. In February 2018, the RBI withdrew all restructuring schemes. However, since Suzlon was already under the CDR process, banks could continue with the restructuring.