BT: Union Bank classifies Suzlon Energy’s loan account as NPA; other banks may follow suit

22 July 2019: Wind turbine major Suzlon Energy Ltd’s financial woes continue to mount. A week after defaulting on the payment of outstanding bonds worth Rs 1,182 crore, its loan account with the Union Bank of India has been classified as a bad loan. The Tulsi Tanti-led company had reported a net loss of Rs 6,494 crore in the March quarter on a standalone basis.

Sources in the know told Mint that Union Bank updated the status of the account as non-performing in the RBI’s Central Repository of Information on Large Credits (CRILC) database in the quarter ended June 30, after repayments were delayed by over 90 days. CRILC is a borrower level supervisory dataset with a threshold in aggregate exposure of Rs 50 million. Worse, the buzz is that more banks are likely to follow suit as the stressed wind turbine maker struggles with its debt pile. The company boasted a consolidated net term debt of Rs 7,761 crore and a working capital debt of Rs 3,380 crore by the end of FY19.

The domino effect

“While Union Bank’s exposure is a little over Rs 70 crore and not that large, it will be incumbent upon other members of the consortium to declare it an NPA as well,” a source told the daily. Other lenders to Suzlon Energy include Bank of India, Bank of Baroda, Central Bank of India, IDBI Bank and Punjab National Bank. The NPA tag by Union Bank will force these other banks to set aside money to cover potential losses on their respective exposures. Under the RBI’s asset classification guidelines, banks have to set aside 15 per cent of their outstanding loans to an NPA account as provisions against a mere 0.4 per cent for standard accounts.

Other defaults

Last Wednesday, the Pune-based company announced defaulting on its bond payment and initiated work on a resolution plan amid talks with Canadian investment major Brookfield Asset Management to sell a majority stake. Notably, discussions are on between Suzlon and Brookfield for a one-time settlement plan with creditors to restructure outstanding bank loans, and Brookfield may come up with a binding offer by the end of this month.

Before this, the company had defaulted on its foreign currency convertible bonds (FCCBs) worth $221 million (Rs 1,517.8 crore) in October 2012 despite failed attempts with FCCB holders for a four-month extension. The company faced a similar crisis of the shortage of working capital to execute a large pipeline of orders (then nearly $7.7 billion and a majority of orders were from the sold-off subsidiary REpower). It had posted losses for three consecutive years. Despite a few paybacks, the company’s debt had swelled to over Rs 10,000 crore. That forced the company to seek a bailout from lenders via Corporate Debt Restructuring (CDR).

How did Suzlon reach this point?

The downfall of Suzlon, which grew as the world’s fifth largest wind turbine maker with revenues of over Rs 26,000 crore in 2008-09, is a classic case of aggressive global expansion without reading future business prospects. The 2008 global financial downturn sucked away a lot of the company’s fortunes and though it managed to subsequently recover and once again manage a strong order book, the global financial slowdown in 2018 again threw a spanner in the works. Soon raw material prices, including steel prices, rose and many orders were postponed.

The shift to auction-based capacity additions – from the earlier system of feed-in tariffs – and the resultant disruption to the market also caught Suzlon Energy, as well as other stakeholders, off-guard. As a result of the change, wind capacity additions in India dropped to multi-year low of 1,523 MW in the last fiscal, down over 72 per cent from 5,500 MW in FY17. Suzlon Energy’s debt binge and its inability to move in time on stake sales and asset monetisation to reduce the debt pile, only made matters worse.

The company now has to worry about its looming debt schedule – in FY20, Suzlon has to pay back Rs 1,928 crore, Rs 835 crore in FY21, Rs 926 crore in FY22 and Rs 4,483 crore in FY23 and beyond.

As reported on BusinessToday

ET: Jaypee Infra: NCLAT reserves order on extension of resolution process

22 July 2019: The National Company Law Appellate Tribunal (NCLAT) on Monday reserved the order over IDBI Bank’s request to extend Jaypee Infratech’s (JIL) resolution process by excluding around 250 days from the ongoing process.

The two-judge bench headed by NCLAT Chairman Justice S.J. Mukhopadhaya will pass the order in its next hearing on July 29.

The lead banker to the bankrupt realty firm had in the previous hearing on Friday told that on September 17, 2018, an application was filed in the National Company Law Tribunal (NCLT) for clarification on the apartment allotees’ voting share and the tribunal decided on it on June 4, 2019.

The lenders wanted this period during which no bid could be approved by the Committee of Creditors (CoC) to be excluded.

Under the Insolvency and Bankruptcy Code (IBC), the resolution process of a company is mandated to be concluded within 270 days, failing which the company has to go for liquidation. The 270-day deadline for Jaypee Infratech ended on May 6.

The appellate tribunal also asked Jaypee Associates Ltd (JAL) to file a submission on its stand on liquidation and extension of the process and what it sees as the way forward, after the company asked the tribunal not to extend the process, while saying that it did not want liquidation of the firm.

Justice Mukhopadhaya observed that if the process is not extended, the only possible step would be liquidation.

The Economic Times reported

BQ: IL&FS Gets NCLAT Approval For Sale Of Wind Power Assets To Orix Corporation

22 July 2019: Infrastructure Leasing and Financial Services Ltd. has received approval from National Company Law Appellate Tribunal for the proposed sale of its 51 percent stake in seven wind energy subsidiaries to Orix Corporation of Japan, IL&FS said on Monday.

The approval was given by Justice (Retired) DK Jain, who has been appointed by NCLAT to supervise the resolution process of these IL&FS group companies, the company said in a release.

The wind energy subsidiaries are held under IL&FS Wind Energy Ltd.

Orix Corporation, at present, owns 49 percent stake in each of seven operational wind power plants of the IL&FS Group and had expressed its intent to buy out the remaining 51 percent stake held by IL&FS Wind Energy.

“The approval has been granted on the conditions that the proposal will now be placed before the NCLT for its approval, and the bid amount realized from the sale be kept in an escrow account,” IL&FS said. This amount in the escrow account will only to be disbursed in accordance with the directions in the proceedings, pending before NCLT/NCLAT.

Orix decided to match the offer of the highest bidder, of about Rs 4,800 crore for 100 percent of enterprise value, contemplating no haircut to the debt of the special purpose vehicles aggregating to approx Rs 3,700 crore, the company said.

IL&FS’ asset sale to Orix will lead to resolution of the following group companies:

• Lalpur Wind Energy Pvt. Ltd.

• Etesian Urja Pvt. Ltd.

• Khandke Wind Energy Pvt. Ltd.

• Retadi Wind Power Pvt. Ltd.

• Wind Urja India Pvt. Ltd.

• Tadas Wind Energy Pvt. Ltd.

• Kaze Energy Ltd.

The IL&FS board had on June 28 approved the asset sale to Orix Corporation.

The BloombergQuint reported