Suzlon in talks with lenders to recast Rs 8,650-cr debt

Debt-laden renewable energy firm, Suzlon is in talks with a few state-owned banks and other lenders to restructure loans aggregating Rs 8,650crore, aimed at cleaning up its balance sheet and to get back on track.

In what will mark phase two of the company’s debt recast, Suzlon is talking to state-owned banks such as State Bank of India, Bank of Baroda, IDBI, Central Bank, Bank of India and a few other lenders to convert its existing rupee loans into long-term maturity loans. The proposed restructuring, if approved by banks, will ensure that there is no immediate cash outflow for Suzlon in the medium term. Interest costs are expected to come down then, said a company official associated with the debt revamp plan.

Suzlon is currently servicing debt aggregating Rs 10,500 crore which entails interest costs of over Rs 1,100 crore annually. The company’s new deal with banks ensures no principal amount payments for two years and is without any covenants. Repayments as and when they come, will be back-ended.

Management sources say this new recast will allow cash savings of Rs 1,000-1,500 crore annually. Suzlon had earlier, in phase one, repaid $780 million debt out of the proceeds from a 35% stake sale in Belgium’s Hansen Transmissions and a new five-year dollar-denominated loan of $465 million from State Bank of India.

Suzlon now wants to restructure its entire capital and then focus on REpower, the company that helps Suzlon book its maximum overseas orders. The Indian company holds 90% in REpower and is working on assets to fund the balance 10%.

In a recent interview to ET Now, in November, Suzlon chairman & managing director Tulsi Tanti said, “Once the capital structure is done, we will buy the remaining stake in REpower.” Suzlon is now also actively pursuing the sale of its balance 26% stake in Hansen which accordingly to management sources is worth about $365 million in the current market.

There are unconfirmed reports that Suzlon may be talking to private equity players for offloading its stake. The company had divested 35.22% of its stake in Hansen for $370 million in November 2009, which resulted in its holding coming down to 26.06%.

“We have always allowed Hansen to build its business and create value. We first exited by selling 10%, then by 35% and in the future also we will first create value and exit the company,” said Mr Tanti.

There are signs of demand picking up in key markets such as US and Europe. Suzlon’s Germany-based wind turbine manufacturing subsidiary, REpower Systems continues to bag new and large orders. But recent brokerage reports continue to be wary of severe competition thanks to new entrants in this segment.

In its latest report dated January 11, Macquarie has dubbed Suzlon an underperformer expecting Korean majors Samsung & AMP; Hyundai to bid aggressively. Suzlon is now working towards consolidating REpower and leveraging new markets and completely clean up its balance sheet.