11 June 2019: Suzlon, India’s largest renewable energy solutions provider, is staring at a default of Rs 1,205 crore on repayments of foreign currency convertible bonds (FCCBs), which are due for redemption next month.
The Pune-based company is facing the liquidity crisis as it has no resolution plan in place. Suzlon had planned an equity transaction with an investor, reported to be Danish wind turbine manufacturer Vestas, to meet its financial obligations, but the deadline to seal the deal lapsed last week.
The potential investor was to infuse equity in Suzlon, which could see the exit of promoter Tulsi Tanti and investor Dilip Shanghvi of Sun Pharma from the company that has over 15GW of wind assets under its service in 18 countries.
Tanti holds about 20% in Suzlon, but 76% of his stake is pledged, while Shanghvi owns around 19% in the company, the shares of which are trading at Rs 5. In 2008, the Suzlon stock was trending at Rs 469. However, the deal with the potential investor has an extension clause. But a new timeline, if any agreed upon, couldn’t be ascertained immediately.
In a statement, Suzlon said that it is committed to reduce its debt and is progressing on strategic initiatives being undertaken. “We do not comment on specific discussions with any specific party at this point. We shall ensure necessary disclosures at the appropriate time,” the spokesperson said.
Suzlon had a debt of Rs 11,141 crore as on March 31, 2019. Its losses widened from Rs 384 crore in fiscal 2018 to Rs 1,537 crore in fiscal 2019 due to lower volumes, foreign exchange losses and finance costs, thus resulting in a negative net worth.
The financial crisis forced Suzlon to default in repayment to some domestic lenders and other creditors. Suzlon had earlier said that the default under term loans and working capital facilities gives unsecured FCCB holders and banks (that had issued a letter of credit for a loan of Rs 3,924 crore) the right to recall the bonds and facilities immediately. The potential investor, which had made a non-binding offer, was also expecting lenders and FCCB holders to waive a considerable amount of debt.
Besides equity infusion and expecting a debt waiver, the investor was to buy one of the units of Suzlon, reportedly the operations and maintenance services (O&M) business in India.
Debtwire in a recent report said that should the deal with Vestas fail to materialise or the sale of the O&M business is not reached in time, Suzlon’s prospects appear bleak. The company might have to work with bondholders on a potential restructuring. Debtwire also noted that Tanti would want to avoid an NCLT-led insolvency process as restrictions on promoters regaining control of a bankrupted company mean he would lose Suzlon. Likewise, FCCB holders may also want to avoid an NCLT process because there is a strong possibility that Suzlon does not have enough distributable value to fully compensate secured lenders much less unsecured ones, Debtwire said.