Suzlon Energy Receives CDR Package Approval

Suzlon Energy has finally received approval for its Corporate Debt Restructuring (CDR) package. The company is now required to sell three of its subsidiaries, which include two domestic subsidiaries and one Chinese subsidiary. As per the conditions set by CDR Cell, the company is required to bring in promoters' contribution of Rs 250 crore. The company has already raised Rs 65 crore by selling more than 2% stake and selling three subsidiaries is a part of its strategy to raise required funds.

Earlier in November 2012 company was admitted in the CDR cell as it was looking to recast its debt of over Rs 13000 crore. It had failed to repay two tranches of Foreign Currency Convertible Bonds (FCCBs) and thus was resorted to the CDR mechanism.

Suzlon Energy has been looking to restructure its debt of over Rs 13000 crore of which only about Rs 11000 crore will be restructured as per the CDR package. The company will get softer repayment terms and also it will enjoy moratorium on some part of the debt. Click here to read more.

One of the main problems that the company faced is the non-recovery of its receivables from one of its US customers (Edision Mission) in excess of Rs 1000 crore. Edison Mission went bankrupt in December 2012, which proved to be a set back to the company. The With debt restructuring package now approved, Suzlon is required to sell its assets to raise funds. Recovery of its receivables, however, would have been a major relief to this cash strapped company.

Earlier pharma major Wockhardt has also taken the help of the CDR cell as it had faced liquidity constraints in 2008. Wockhardt was a strong turnaround story in 2012. However, its effort were met with success as it operates in a strong business model. Suzlon currently operates in a business with thin margins. Besides, wind power manufacturers globally are facing range of problems including high competitive environment and slower execution, which is taking a toll on their profits. Suzlon being one of the top wind power manufacturer is not insulated from these shocks. Hence, it is very difficult to say whether it will turn around strongly.