Suzlon Energy may sell stake in three divisions to pay off debt

Chinese arm among the subsidiaries that might be used by wind power equipment maker to raise funds

This year, Suzlon Energy might have to either sell its subsidiaries SE Electricals, SE Forge and Suzlon Energy Tianjin or sell stakes in these. Suzlon Group would also have to sell some of its offices, according to a senior banker. Proceeds from these sales would be used to repay debt.

This is part of the commitment the company had given 19 lenders, part of the consortium that had restructured the company’s loans.

According to the banker, Suzlon Group has committed to divest stake in its wholly-owned Chinese subsidiary Suzlon Energy Tianjin. In the first trance of the stake sale, it has to raise about $27 million (Rs 143 crore) by September. In the second, it has to raise $9 million (Rs 47 crore) by September 2017. The company has already commenced the sale of its Chinese facilities.

Suzlon would also have either to sell SE Forge or a stake in the unit by September-end. It would also have to exit SE Electricals by the end of this year.

The company didn’t respond to an email seeking comment, as it was observing a silent period, ahead of the announcement of its results.

“Suzlon Group will have to undertake divestments of key subsidiaries and/or raise fresh equity by March 2016 in one or more tranches to meet obligations,” said a banker associated with the debt restructuring package for the wind power equipment maker.

The company would also try to realise receivables from its client Big Sky LLC, a subsidiary of Edison Mission Energy, USA, which owes about $200 million (Rs 1,060 crore) to Suzlon. “We have already started legal proceedings for the money. The amount they owe us is secured against the wind farm they own,” said a Suzlon official.

As a part of the debt restructuring package, Suzlon had received a two-year holiday on interest payments, principal and term-debt interest payments. The company doesn’t have to pay even working capital interest for six months. The company had said interest for two years was Rs 1,500 crore, and this would be converted into equity or equity-linked instrument through the next two years.

Last month, about 19 bankers had closed Suzlon’s corporate debt restructuring (CDR) package of Rs 9,500 crore. The company had provided various assurances to the lenders, including equity commitment from promoters.

The company was also given a ten-year door-to-door back-ended repayment plan, which meant the total loan exposure was spread through the next ten years.

The CDR package was effected from October. Suzlon Energy’s loans stand at about Rs 13,000, and this has hit its balance sheet. In October, the company defaulted on its foreign currency convertible bonds payments of $221 million (Rs 1,189 crore).