Suzlon Energy, one of the world's largest wind-turbine makers, today announced the sale of its German subsidiary for 1 billion euros (USD 1.2 billion) to pare its mounting debt.
Suzlon said US-based private-equity fund Centerbridge Partners LP had bought Senvion in a deal under which it stands to earn another 50 million euro depending on certain conditions.
Proceeds from the sale of Hamburg-based Senvion SE will be used to pare part of the about USD 2.6 billion debt that was left over from a decade-long expansion and acquisition spree. It hopes to become profitable again in 2016.
Suzlon will now focuses on home and high-growth markets, the company said in a statement adding the deal was expected to be completed before the end of March.
The company, which suffered India's biggest convertible- bond default in 2012, has restructured local loans, refinanced international debt and cut the number of people it employs to try to streamline its costs as its business has suffered from weaker-than-expected demand for turbines.
Suzlon Chairman Tulsi Tanti said the sale was at a "minor loss" but the proceeds from the deal will help reduce borrowings, cut interest burden and free up more capital for projects to help it return to profitability next fiscal.
As much as Rs 6,000 crore out of the total sale proceeds of about Rs 7,200 crore will be used to repay part of its Rs 16,500 crore of debt. The balance amount will be used for working capital needs, he said.
Suzlon was on a rapid expansion until a few years ago, riding a boom in green-energy investment. But the withdrawal of government subsidies in India and other markets, in addition to the global economic slowdown, knocked the wind out of its business.
Its shares reversed initial gains and fell over 7 per cent to less than Rs 16 at the close on the BSE.
Tanti said it is a "wise" decision to exit the business acquired in 2007 for 1.4 billion euros and constitutes as much 65 per cent of the business.
"The proceeds will be used for debt repayment thereby reducing interest cost and (augmenting) business growth," he said.
The company was forced to restructure USD 1.8 billion of debt after defaulting on a USD 209 million convertible bond redemption in October 2012.
At the end of the second quarter of the current fiscal, Pune-based Suzlon had Rs 8,900 crore of local-currency debt and dollar borrowings of USD 1.27 billion, including working capital loan.
