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Suzlon Energy bankers stare at haircut on loans in new debt recast plan


MUMBAI: Bankers of the loss-making Suzlon Energy are working on a plan to recover dues that may include a significant haircut on loans as the company does not have any active interest from potential buyers, two sources in the know said.

After Suzlon defaulted on loan repayments and its loans were categorised as non-performing assets by lenders, the company made a one-time settlement offer to its bankers that entailed selling a majority stake in the company to raise funds to repay debt. Two international companies had shown interest at different stages, but both have subsequently pulled out.

In June,
<strong>ET</strong> had reported that Suzlon had told bankers that Canadian investor Brookfield was exploring acquisition of majority stake in the company; the deal didn&rsquo;t work out as the company could not reach an agreement on valuation with the bankers.

In August, Suzlon said it has a revised offer from another potential investor, whose earlier offer had expired in June before the company made the one-time settlement offer. But sources said that talks with this investor, reportedly Denmark-based Vestas Wind Systems, also fell through.

&ldquo;Banks are working on a restructuring plan that may involve nearly 50% haircut after all bidders have backed out. The worry is that no buyers will show up if the company is taken to bankruptcy court and it may eventually have to be sent to liquidation,&rdquo; a senior banker in the know told
<strong>ET</strong>.

Suzlon Energy declined to comment on the development while an emailed query sent to Vestas remained unanswered till the time of going to press.

Sources said that a plan is still under consideration as all banks are not on board with the restructuring proposal. The challenge for the bankers would be that the cash-strapped Suzlon may not be able to repay the loans immediately even with the haircut, a source said.

Auditors of Suzlon Energy said in August that improvement of liquidity conditions is contingent upon fructification of the offer from the potential investor, approval of the one-time settlement plan by the lenders, approval by FCCB holders for the waiver and approval of the shareholders of the company.

<strong>Inter-creditor agreement</strong>
They had said that the company&rsquo;s ability to continue as a going concern is solely dependent on successful outcome of the resolution plans.

In July, Suzlon&rsquo;s secured creditors signed an inter-creditor agreement to resolve the debt crisis by working with the company. According to a central bank directive on June 7, such agreements must be signed within 30 days of the first default to any lender. Suzlon has maintained that it was working on a &ldquo;holistic solution&rdquo; for its debt.

The Tulsi Tanti-led company had net term debt of Rs 7,751crore as on June-end, which included a foreign currency convertible debt. Its working capital loans were at Rs 4,000 crore.

The company defaulted on repayment of principal and interest to lenders towards term loans, working capital facilities, and in making payments to certain overdue creditors in FY19. The company then defaulted on a $172 million (Rs 1,200 crore) foreign currency convertible bond redemption on July 16.

This was the second instance of a major default in the 24-year life of the Indian wind turbine maker. In 2012, it had defaulted on FCCB repayment, the biggest of its kind at the time. In fact, the bonds it defaulted on in July were issued in exchange of one of the series on which it had defaulted at that time.

In 2013, Suzlon underwent a corporate debt restructuring for its Rs 9,500 crore loans as it faced 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&rsquo;s problems persisted as the Indian government rolled back incentives to the wind energy sector, the market shrank and competition intensified even as debt remained high.



News Date: 09-Sep-2019

News Source: https://economictimes.indiatimes.com/markets/stocks/news/suzlon-energy-bankers-stare-at-haircut-on-loans-in-new-debt-recast-plan/articleshow/71041338.cms

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