Suzlon Issues Bonds Worth USD 647 Million

Pune-based wind turbine maker Suzlon Energy has raised USD 647 million (Rs 3400 crore) through the issue of bonds. The bonds will be listed on the Singapore stock exchange (SGX). Reports suggest that the bonds received a good response from the 75 overseas investors and have been oversubscribed twice at the moment. The new bonds will have a five-year maturity period and will carry a coupon rate of 5%.

The news may have some positive effect on the debt-ridden company, which has managed to raise money after it defaulted on FCCBs worth USD 221 million last year.

These bonds are guaranteed by Suzlon’s lenders including SBI, YES Bank, IDBI Bank, ICICI Bank, Bank of India, Bank of Baroda, etc. These lenders have already agreed to the debt restructuring of the company. The oversubscription of the bonds is mainly due to the guarantee provided by the lenders, which means that investors would be assured of the safety of their capital.

Suzlon is expected to use the proceeds of the bonds to refinance its USD 634 million debt. As per Financial Express, USD 300 million will be used to repay loans maturing on March 31, 2013, while the rest will be used to pay its FCCB holders. Last year, the company’s FCCB holders refused its request to extend the repayment deadline, after which it defaulted on FCCBs worth USD 221 million. Following this, the company opted for debt restructuring in November 2012 and was admitted to the CDR cell in January 2013. Under the CDR, Suzlon’s debt of Rs 9500 crore is being restructured. As per its Q3FY13 results, the company’s total debt stands at Rs 14177 crore.

The stock has seen high volatility, amid which it touched its lifetime low of Rs 13.20 as on March 22, 2013. It is still trading in a lower range, from where one can expect to see some upside. Some market experts are also giving a target of over Rs 20 on the stock based on technical analysis.

We, at DSIJ, are of opinion that the stock, though trading at a historical lower range, is only for risk-takers, and that too only to gain small profits at the moment. Risk-averse investors should ignore this counter until the company reports quarterly profits.