Suzlon defaults on $172-mn bonds, in talks with investors for stake sale

In October 2012, when Suzlon defaulted on a repayment of $221 million, it was India's biggest bond default till then

Wind energy major Suzlon Energy did not pay its bondholders for $172-million in foreign currency convertible bonds (FCCBs) which were due on Tuesday, the company disclosed to the BSE exchange. The $172 million was part of a bond series first restructured in 2014.

“The company is working on a holistic solution for its debt and continues to be in discussion with various stakeholders in relation to its outstanding debt, including the bonds,” Suzlon stated.

Sources say it has been in talks with investors like Brookfield for a stake sale. In October 2012, when Suzlon defaulted on a repayment of $221 million, that was India’s biggest bond default till then.

Then, in 2014, Suzlon restructured $485 million worth of bonds which were initially due for repayment between 2012 and 2016. 

These were valued at  $547 mn at the time. The $172-mn FCCB default on Tuesday was for the last tranche of the $547 mn.

“With the company in talks with investors like Brookfield, these bond holders might need to take a hair-cut (a write-off) to reach a resolution. Unlike in the past, though, the bond holders now have an option, to take the company to the National Company Law Tribunal,” said an analyst who did not wish to be identified.

Of the total FCCBs of $547 mn, the company had converted $375 mn into equity by 2018. Suzlon’s share price has been on a downward spiral for two years. From Rs 18.85 a share two years earlier, it closed on Tuesday at Rs 4.67 on the BSE.

CARE Ratings in an August 2018 report had said, “The July 2019 series has conversion terms of Rs 15.46 per share and an exchange rate of Rs 60.225 to a dollar (well above the current rate)."

Suzlon has attempted to resolve its debt issued for almost seven years, with limited results. It entered the corporate debt restructuring process in 2012; it has yet to exit. In 2015, Dilip Shanghvi took a 23 per cent stake in the company for Rs 1,800 crore.

For 2018-2019, the company reported a consolidated loss of Rs 1,527 crore and debt of Rs 9,624 crore. CARE Ratings assigned a default measure for the company in April this year