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Energy

Suzlon Energy completes debt restructuring, banks take steep haircut

Updated : July 01, 2020 04:13 PM IST

The company said it would not pay interest of 9 percent per annum on its debt, repayable over 10 years starting July 1, 2020.

The promoters would also be infusion Rs 392 crore of capital as part of the restructuring.

Debt-laden wind turbine manufacturer Suzlon Energy on Wednesday announced the completion of its debt restructuring with the unanimous approval of secured lenders.

In a statement released to the media, Suzlon said with the restructuring, its term debt would reduce substantially. The company said it would not pay interest of 9 percent per annum on its debt, repayable over 10 years starting July 1, 2020.

Also read: Renewable energy gains steam against coal in India, eyes reforms for further boost

The remaining debt of secured lenders, Suzlon said would be replaced by 0.01 percent Optionally Convertible Debenture (OCD) of the company and 0.0001 percent Compulsorily Convertible Preference Shares (CCPS) of its subsidiary redeemable or convertible in 20 years.

As per banking executives in the know, the restructuring plan involves splitting the debt into sustainable and unsustainable portions. Suzlon owes SBI-led consortium of 18 banks over Rs 13,800 crore. Of this, only Rs 5,200 crore of debt is deemed sustainable, and is expected to be repaid at lower interest rate of 9 percent per annum over a 10 year period, said a bank executive involved in the plan.

Also read: Tata Power fast tracks debt reduction drive; renewable energy biz InvIT seen in Q2

The larger portion of the debt of approximately Rs 8,600 crore is seen as unsustainable, the banker quoted earlier added. This portion will be converted into OCD and CCPS which is redeemable after 20 years. In effect, this would imply a steep 62 percent haircut for the banks involved, even though on paper no debt has been written off. SBI, Bank of India, PNB, Union Bank of India, Axis Bank, ICICI Bank, IDBI Bank, Yes Bank are among the company’s 18 lenders.

CNBC-TV18 had reported earlier that the SBI-led consortium of lenders had approved the debt restructuring plan in March this year.

The promoters would also be infusion Rs 392 crore of capital as part of the restructuring.

Suzlon's chief financial officer Swapnil Jain said, "This debt restructuring will ease the pressure on our cash flows significantly and give us headroom for ramping up business operations. We have reduced our fixed cost steeply and brought down the interest costs by more than 70 percent. This has resulted in substantial reduction in the break-even point from pre-restructuring levels ensuring a long term sustainable business case."

Suzlon Group's chairman and managing director & founder Tulsi Tanti said, "Consortium of lenders led by SBI 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 MSME vendors and protecting 13 GW of operating wind energy assets of the nation."

Also read: Govt mulls basic customs duty on solar equipment

The renewable energy firm has battled a financial crisis before as well, and sold prized assets in the past to attempt to stabilise its position. While the lenient terms of this debt restructuring will ease off the repayment pressure for the company, the stress has not entirely dissipated for Suzlon.

It posted a net loss of over Rs 740 crore in the December quarter of FY20, its last reported number. Its net sales in the third quarter had also fallen 40 percent from the previous year to a little over Rs 650 crore.

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