Suzlon Energy has completed its debt restructuring after satisfying the conditions put forth by the lenders that included a capital infusion of Rs 392 crores by promoters, the wind turbine maker said on Wednesday.
The loss making company said that its term debt has been reduced with a lower rate of interest effective July 1 and the balance debt of secured consortium lenders has been replaced by optionally convertible debenture of the company and compulsorily convertible preference shares of its subsidiary.
Chairman Tulsi Tanti said, “Consortium of lenders led by State Bank of India and the company have worked together to protect the interests of all the stakeholders involved, thereby protecting the Indian wind energy sector, saving thousands of direct and indirect jobs, ensuring the survival of large number of micro, small and medium enterprises vendors and protecting around 13 gigawatts of operating wind energy assets of the nation. This initiative takes us a step forward to stay ‘atma nirbhar’ (self reliant) in manufacturing of wind turbines and its components, making India the supply chain hub for the global wind sector.”
In March, the troubled-Suzlon Energy received approval from lenders led by State Bank of India to restructure its debt worth Rs 14,000 crore. The company and lenders were working on the resolution plan as per the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions, 2019 issued by the central bank through a circular dated June 7, 2019. The lenders had agreed to convert Rs 8,200 crore worth loans to long-term optionally convertible debentures payable in 20 years and asked promoters to infuse equity.
“Capital infusion of Rs 392 crores by promoters, key shareholder and various stakeholders demonstrates their commitment and confidence in Suzlon. The wind energy sector in India is at an inflection point and our debt restructuring has resulted in a stronger balance sheet enabling the company to focus on capturing the tremendous growth potential in the Indian wind energy sector,” said Suzlon’s group Chief Executive Officer JP Chalasani.
The term debt has been reduced substantially with interest of 9% per annum repayable over 10 years starting July 1. The balance debt of secured consortium lenders has been replaced by 0.01% optionally convertible debenture of the company and 0.0001% compulsorily convertible preference shares of its subsidiary redeemable or convertible in 20 years.
The debt restructuring will ease the pressure on the company’s cash flows and give it headroom for ramping up business operations. “We have reduced our fixed cost steeply and brought down the interest costs by more than 70%. This has resulted in substantial reduction in the break-even point from pre-restructuring levels ensuring a long term sustainable business case. It improves our overall competitiveness in the marketplace and now Suzlon is back to business from a position of strength,” Swapnil Jain, chief financial officer said.
Suzlon signed an inter-creditor agreement to resolve the debt crisis in collaboration with the company in July 2019, after the company defaulted on loan repayments and its loans were categorised as non-performing assets by lenders.
This was the second instance of a major default in the 24-year life of the company, founded by Tulsi Tanti. Prior to this, in 2012, it had defaulted on repayments of Foreign Currency Convertible Bonds, the biggest of its kind at the time. At the time, the company issued fresh bonds in exchange for one of the series on which it had defaulted in 2012, but it defaulted on these bonds again in 2019.
In 2013, Suzlon’s lenders restructured Rs 9,500 crore of loans as it faced a severe liquidity crunch and could not service debt. In 2015, billionaire Dilip Shanghvi came in as a white knight, buying a 23% stake. But the company’s problems continued as the Indian government rolled back incentives to the wind energy sector, the market shrank and competition intensified even as debt levels remained high.
Source: Economic Times