Suzlon hires Houlihan Lokey, plans to rejig Rs 1,200-crore overseas debt

Renewable power company Suzlon Energy has hired Houlihan Lokey, an investment banking firm, to help it restructure its foreign currency convertible bonds (FCCBs) worth Rs 1,200 crore, which is due in July. The bondholders will have to take a substantial haircut on their investment as the company’s financials have deteriorated since the bonds were issued.

Currently, the bonds are trading at a discount of 17 per cent overseas, said a source close to the development. The Suzlon Energy shares fell by 12 per cent on Thursday to Rs 7 a share on Thursday.

Bankers said in the first nine months of the current financial year, the firm’s operating revenue declined by 47 per cent to Rs 3,003 crore as compared to Rs 5,710 crore reported in the same period of fiscal  2018. It also posted a net loss of Rs 794 crore in the first nine months of fiscal 2019 as against a loss of Rs 276 crore in the same period of fiscal 2018.  Suzlon has a consolidated debt of Rs 10,300 crore as of September last year.

An email sent to Suzlon did not elicit any response.

According to bankers, the total FCCBs of $547 million issued in 2013, the company had already converted FCCBs of $375 million till December last year. The remaining FCCBs worth $172 million were to be conversed at a rate of Rs 15.46 per share at an exchange rate of one $ to a Rs 60.22. While the company’s shares have declined, the Indian currency has also depreciated versus the US$.  Considering the current market price and the conversion rate, redemption of the bonds will be challenging, said a source.

Recently, Suzlon was funding its losses and repayment obligations through working capital reduction and internal accruals. The company’s cash and bank balances and liquid investments also fell from Rs 486 crore as on March 31 to Rs 124 crore as on December 31 last year. Excluding FCCBs, Suzlon has repayments of Rs 156 crore due as on first nine months of fiscal 2019 and Rs 639 crore in the financial year starting April. “The firm will have to sell assets to repay banks and bondholders,” said a lender, asking not to be quoted.

In December last year, reports had said the company was looking to sell 49 per cent stake in its subsidiary Suzlon Global Services to bring its debt down by 40 per cent. The company was expecting a valuation of Rs 8,000 crore. Sale of these assets is a key for the firm to come back to tracks, said a banker.

In FY13, Suzlon was referred to the corporate debt-restructuring cell, as it was unable to meet its commitments to banks. At that time, the lenders took into account the positive long-term outlook of the wind energy sector and the CDR package was approved in December 2012 and was implemented in March 2013.

In 2014, the promoters of Sun Pharmaceuticals, led by Dilip Shanghvi, invested Rs 1,400 crore to pick up 23 per cent stake in Suzlon. Shanghvi also invested an additional Rs 450 crore in a wind farm. Since his investment, Suzlon’s market value has crashed from Rs 10,313 crore to Rs 2,248 crore as on Thursday, leading to a substantial mark -to-market losses for the Shanghvi family.