Suzlon Energy’s plan to raise as much as $800 million this year in loans and a bond sale quelled speculation it may sell unit Repower Systems AG to settle debt.
A group of about 20 banks have agreed in principle to extend a term loan of as much as $300 million, India’s largest wind-turbine maker said on May 18. SBI Capital Markets, one of the lead banks, said it’s “extremely confident” of closing the deal in time to ensure Suzlon meets its June bond repayments in full. The company is also working on plans to sell as much as $500 million of high-yield bonds this year.
“Selling Repower doesn’t look too likely anymore,” as the company should be able to safely meet its obligations this year, said Rosita D’Souza, a Singapore-based credit analyst at Elara Capital Plc.
Suzlon shares gained as much as 3.7 percent to 20.85 rupees and traded at 20.50 rupees as of 9:41 am in Mumbai. The stock has gained 14 percent this year, compared with a 5.3 percent increase in the key Sensitive Index.
Suzlon is working on plans “to monetize non-critical assets” according to an e-mailed statement on May 18. Repower is the company’s “most critical asset” and not for sale, Chief Financial Officer Kirti Vagadia said in an April 27 interview.
Suzlon probably plans to transfer cash from the unit to meet repayments, HSBC Holdings Plc analyst Charanjit Singh said in an e-mail to clients after the announcement.
Repayments maturing
HSBC’s Singh estimated in March that Suzlon has $700 million in bond and loan repayments maturing in the next 12 months and an estimated cash balance of 7.5 billion rupees ($138 million). Its obligations included $358 million of dollar- denominated convertible notes maturing on June 12 that investors are unlikely to swap for shares with its stock trading 79 percent below the bond’s conversion price.
Those pressures fueled speculation that Suzlon may need to sell or list a stake in Repower, its cash-rich Hamburg-based unit and Europe’s third-largest supplier of offshore wind turbines.
Suzlon was seeking at least 1.5 billion euros ($1.9 billion) from a sale of Repower or may consider listing a stake in the unit, people with knowledge of the matter said last month. Under pressure from creditors, Suzlon Founder Tulsi Tanti has met France’s Alstom SA, General Electric and Siemens AG about a sale, the Wall Street Journal said in March.
“Repower sale discussion, if any, would most likely be discontinued,” Atul Gharde, a Hong Kong-based credit analyst at SJS Markets said by e-mail today. “If the bank loan deal goes through, then Suzlon should be in a much better position to meet its obligations for the year.”
‘Out of woods’
Suzlon plans to sell as much as $500 million in high-yield bonds later this year. Suzlon has yet to appoint bankers and is “waiting for the right window,” Vikas Rathee, Suzlon’s head of corporate finance, said in an interview on May 18. “The market has to be there.”
Suzlon has another $200 million in convertible debt maturing in October. The company requested a 45-day extension on two bonds maturing June 12 in case of procedural delays in obtaining its new term loan of as much as $300 million, Rathee said. Bondholders are supportive and won’t impose any penalties, he said.
The dollar-denominated term loan will probably be raised by Suzlon’s overseas holding company, AE-Rotor Holding BV, and won’t require posting fresh collateral or increasing Repower’s leverage, Rathee said. Raising the dollar loan overseas will allow Suzlon to better re-balance debt across the group and reduce interest costs, he said.
“When we’ve paid these bonds, we’ll be out of the woods,” Rathee said.
