Suzlon Energy, India’s biggest wind-turbine maker, climbed as much as 15 per cent after its Repower unit got a 750 million euro ($999 million) loan, helping erase investor concerns it can’t pay back bondholders.
Banks led by BayernLB Holdings AG, Commerzbank AG and Deutsche Bank AG (DBK)agreed the syndicated loan with a 2.5 year term, Repower Systems SE (RPW) said today in a statement sent by e- mail. The loan will refinance the existing 600 million euro credit facilities Repower agreed in May 2009, according to the company, based in Hamburg, Germany.
Suzlon had its biggest one-day jump in more than a year, rising 11.5 per cent. It closed at a nine-day high of 29.7 rupees in Mumbai.
“This is more than enough to cover any redemptions made by bondholders,” of Suzlon’s foreign currency convertible notes this year, Gaurav Oza, a Mumbai-based analyst for brokerage AK Stockmart Pvt, said by phone today.
Suzlon may face $569 million in bond redemptions this year if investors holding its foreign currency convertible notes choose not to swap them for shares.
Suzlon’s bonds are set to miss their conversion into equity following a 40 per cent slide in the shares in the past year, when the BSE India Sensitive Index lost 4.7 per cent. Conversion prices for the bonds range from 76.68 rupees to 97.26 rupees, according to data compiled by Bloomberg.
Cash flow
Suzlon said earlier it would be able to use internal cash flows to pay off bondholders if necessary, according to Oza. “But then orders slowed and last quarter it reported a loss. It desperately needed cash and Repower has a good credit rating so it used it as a vehicle to raise funds,” he said.
“The confidence that our banks and credit insurance companies are showing in our strategy is an important sign for all our stakeholders, especially given the current difficult environment in our industry,” Derrick Noe, chief financial officer at Repower, said in the statement.
In total 13 German and international banks and credit insurance companies took part in the loan which comprised a 725 million euro letter of guarantee and a 25 million euro credit facility, according to the statement.
“We have enough liquid funds, so there is not much need to get cash from banks,” Thomas Schnorrenberg, head of investor relations at Repower, said today by phone. “With increasing business and amount of prepayments from customers we have to hand out more guarantees to our customers for those prepayments,” he said.
Repower expects “double-digit growth” for both sales and earnings for this and the next financial year, Noe said. The finance will help cover the increased guarantee needs of Repower reflecting business opportunities in international onshore and offshore wind markets, according to the statement.
About 20 per cent to 30 per cent of Repower’s order book for the next one or two years comes from offshore wind with the remainder from onshore wind orders, Schnorrenberg said.
