Suzlon Receives Nod For Rs 9500 Cr Debt

Debt-ridden wind turbine marker Suzlon Energy has received a formal approval for its Rs 9500 crore debt restructuring scheme. In Nov 2012, it was admitted to the CDR cell, and now the package has been approved by a consortium of 19 banks.

Under the package, the company will receive a two-year moratorium on the principal and interest payments on its term debt. The CDR has also reduced the interest rates on its debt by 3%. On its working capital loans, Suzlon will receive a moratorium for 6 months on interest payments. Also, a total debt of Rs 1500 crore will be converted into equity instruments over 2 years, which will reduce its interest payments and improve the interest cover ratio. Besides, the company will also receive funds to meet its working capital requirements (Rs 1800 crore).

The CDR cell, however, will not be considering the foreign currency denominated debt of the company.

For the debt restructuring, its promoters are required to bring in a contribution of Rs 250 crore. The liquidity-starved firm is in the process of selling some of its assets, while its promoters have sold their stake (Rs 62 crore) to raise the funds. However, the asset sale program of Suzlon is taking a beating as it is not able to sell its business in China. The company from which receivables of Rs 1000 crore were due has also filed for bankruptcy. Suzlon has already pledged most of its shares, hence how it will raise the funds is a question. The management, which has not been forthcoming so far, must come forward and clarify on how they will raise the funds.

The lenders have also asked the company to either sell its German subsidiary REPower or bring in an additional Rs 2500 crore. The future of this major revenue contributor subsidiary is jittery on this count. Suzlon has the option of either selling this subsidiary or listing it on the bourses, but these options may bring in only limited cash as the valuations of wind turbine makers have taken a beating worldwide.

At an earlier point, we had advised investors with a high risk-taking ability to buy the scrip. More recently, however, we recommended that readers exit the counter. The movement in the stock remains very speculative, and we would maintain our stance to avoid the scrip.