ET: Suzlon says debt resolution not dependent on single option, still working to reduce debt

9 September 2019: Suzlon Energy has said that its debt resolution plan is not dependent on a single option and that the company is working with its bankers to reduce its debt.

“We wish to clarify that Suzlon’s debt resolution and revival plan have never been dependent on any single option. We wish to reiterate that we continue to work on significant debt reduction alongside with our lenders,” the company informed bourses on Monday in response to reports that its one-time settlement offer to bankers is called off as potential investor has pulled out.

ET reported on Monday that bankers of the loss-making Suzlon Energy are working on a plan to recover dues that may include a significant haircut on loans as the company does not have any active interest from potential buyers.

The loss making wind turbine maker defaulted on loan repayments, paying overdue creditors and FCCB repayment. Its loans were categorised as non-performing assets by lenders and, therefore, the company made a one-time settlement offer to its bankers that entailed selling a majority stake in the company to raise funds to repay debt. Two international companies had shown interest at different stages, but both have subsequently pulled out.

The Tulsi Tanti-led company had net term debt of Rs 7,751 crore as on June-end, which included a foreign currency convertible debt. Its working capital loans were at Rs 4,000 crore.

The Economic Times reported

LM: Suzlon’s auditor bets on potential investor to keep it going

15 August 2019: An offer from a potential investor is critical for wind turbine maker Suzlon Energy Ltd. to repay lenders and continue as a going concern, its auditor Deloitte Haskins & Sells LLP said in a review report Wednesday.

The offer envisages infusion of additional equity in Suzlon and a waiver of some of the amount due to lenders and bond holders. Based on that, a one-time settlement has been proposed to lenders, the auditor said.

“Improvement of liquidity condition is contingent upon fructification of the offer,” Deloitte said. “Such events are not within the control of the group.”

Suzlon, which reported a first-quarter loss of ₹335 crore ($47 million) Wednesday, missed repaying $172 million on notes due in July. In addition, the company and certain subsidiaries have defaulted on repayment of loans and interest aggregating nearly ₹1,300 crore as of June 30, according to the auditor.

Over the past two years, India’s shift to auctions for building wind projects from an earlier fixed-tariff program has squeezed orders and pressured profit margins of turbine makers. The company is also losing ground to foreign competitors such as Vestas Wind Systems A/S and Senvion SA.

Last week, a $1.2 billion settlement plan, backed by Denmark’s Vestas was said to be proposed to Suzlon’s lenders, Bloomberg reported.

Post default, the company’s operations are at a sub-optimal level, Suzlon’s group Chief Financial Officer Kirti Vagadia said in a separate press release. The management is working toward debt resolution, fixing the capital structure and exploring various funding options, he said.

A Suzlon spokeswoman declined to comment on the auditor’s report.

The LiveMint reported

ET: Brookfield no longer in race for Suzlon Energy stake as talks fail

7 August 2019: Brookfield’s plan to acquire a majority stake in Suzlon Energy has fallen through, after the Canadian investor could not reach a deal with the wind-turbine maker’s lenders on valuation, two people aware of the development said.

Lenders did not agree to the amount that Brookfield wanted them to forego to proceed with the deal, and are now working with Suzlon on other resolution plans, they told ET.

“Brookfield was interested in Suzlon only if the valuation was attractive,” one of the people said. “The haircut on loans that they were asking was not acceptable to banks.”

Brookfield had asked for a 60-70% haircut on the debt, a senior banker said, adding: “The deal with Brookfield is not happening.”

Emails to Suzlon and Brookfield seeking comment remained unanswered at press time Tuesday.

Suzlon, which has defaulted on loan repayments and has loans categorised as non-performing asset by lenders, was banking on a deal with Brookfield to resolve its stressed debt. In July, its secured creditors signed an inter-creditor agreement to resolve the debt crisis by working with the company. According to a central bank directive on June 7, such agreements must be signed within 30 days of the first default to any lender.

Lenders are working closely with the company to resolve the issue, the senior banker said. “There is still some time as per the inter-creditor agreement signed mid-July.”

On June 24, ET reported that Suzlon had offered a one-time settlement to its lenders. Shares of Suzlon closed 1.7% lower at Rs 4.25 on the Bombay Stock Exchange Tuesday.

The Economic Times reported

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

LM: Debt-laden Suzlon may be an attractive bet for Canadian asset manager Brookfield

18 July 2019: India’s largest wind turbine maker Suzlon Energy Ltd, once a darling of the stock markets, defaulted on payments to bondholders earlier this week, thus again leading the company to knock at its creditors doors for a debt restructuring solution.

Following the default, secured creditors of Suzlon signed an inter-creditor agreement, under which the lenders will look to implement a strategy to resolve the stressed account.

One potential resolution that has emerged involves Canadian asset manager Brookfield Asset Management, which manages over $350 billion of assets.

Bloomberg reported on 11 July that the Canadian company is in talks with Suzlon’s creditors to restructure the outstanding bank loans of more than ₹11,000 crore ($1.6 billion), under a so-called one-time settlement plan.

While that’s good news for Suzlon and its lenders, what does the company offer Brookfield, which has so far invested in yield generating infrastructure and real estate assets in India?

Suzlon’s operations and maintenance (O&M) services business, which caters to almost all the Suzlon turbines installed in the Indian market and overseas, is probably the biggest attraction for Brookfield, said an infrastructure private equity fund manager on the condition of anonymity.

“Company’s valuation is largely dependent on O&M, there is not much juice left on the equipment side. Suzlon has installations overseas as well. They might be hoping that if they buy it at the right price then by offering these O&M services to the large base of installation they can make good money. These kind of transactions are happening globally,” he said.

Brookfield will look at it as a wider global play, he added. Brookfield manages $47 billion of assets under its renewable business, comprising a total portfolio of 18 gigawatts, which includes 4.8GW of operating wind assets.

Suzlon has an installed wind turbine base of over 15 GW, with about 12GW in India and 3GW in overseas markets including the US, Australia and Europe. Suzlon, in a recent investor presentation, said that it expects the industry to see new orders worth 6-7GW in FY20 and 8-9GW in FY21, indicating a strong future pipeline of orders.

In FY19, the company reported O&M services revenue of ₹1,907 crore, up 8.7% from the previous fiscal’s services revenue of ₹1,754 crore.

The O&M business, specifically in wind energy, is a very sticky business, making it an attractive proposition, said another investor.

“Unlike solar projects where you can outsource the O&M to a third party, for wind turbines you need many specialized skills and equipment and spare parts, as a result of which, to maintain, repair and improve a turbine, you ideally need to be that turbine manufacturer,” he said, requesting anonymity.

All the existing projects, which are going to operate for another five to 20 years, will continue to need to pay somebody to operate and maintain them, the person said.

A third person who also did not wish to be named said Suzlon’s pioneering position in wind energy sector means that the company also holds other interesting assets such as intellectual properties and a land bank.

“Suzlon happens to have one of the largest numbers of wind masts to gather wind data across the country. To build a wind project you need to have at least 3-4 years of on-site data, ideally, before you can actually build the project. Getting wind forecasting wrong can result in the whole economics of the project going for a toss. So, there is a lot of value in having these wind mast data,’ he said.

Suzlon’s ownership of land parcels is another asset that a buyer will see value in.

“Today, you need to have the highest wind resource sites to make these prevalent lower tariffs work. So, having access to some of these lands is an added advantage,” said the third person cited above.

An email seeking comment from Brookfield did not elicit a response.

The LiveMint reported

ET: Suzlon defaults on bond payment, sources say it’s in talks to sell stake

16 July 2019: India’s debt-laden Suzlon Energy said it defaulted on a $172 million bond payment on Tuesday, as sources aware of the matter said the wind power equipment maker was in talks with several global private equity funds to sell a majority stake.

The company’s creditors, led by India’s biggest lenders State Bank of India, last week signed a so-called inter-creditor agreement (ICA) under which they had agreed not to take the company to a bankruptcy court.

Instead, they are studying a one-time settlement plan offered by the company, said the sources, who asked not to be named as they were not authorised to discuss the matter publicly.

It was not immediately known whether the ICA included the company’s bondholders or not.

The western India-based company said it had not paid $172 million on an outstanding foreign currency convertible bond (FCCB) that was due on Tuesday.

“The company is working on a holistic solution for its debt and continues to be in discussions with various stakeholders in relation to its outstanding debt (including the bonds),” it said in a statement.

The company’s shares fell more than 4% to close at 4.60 rupees on Tuesday, compared with a 0.6% rise in the broader Nifty index.

SBI’s creditors “have sent feelers to all major private equity firms and are talking to some similar sized private equity firms such as Brookfield”, said one of the sources, a Mumbai-based banker.

He said these included a U.S.-based private equity major, but refused to identify the firm.

SBI and Suzlon did not immediately respond to emails seeking comment.

Bloomberg reported last Thursday that Canadian company Brookfield Asset Management Inc. planned an offer for a majority stake in Suzlon and was talking to the firm’s creditors to restructure its outstanding bank loans.

Suzlon, once a shining star in India’s renewable energy space, is struggling with debt of over 110 billion rupees ($1.6 billion).

The company had restructured FCCBs worth $485 million in 2014 at a conversion price of 15.46 rupees a share. Over the course of the last five years most of the FCCBs were converted into equity barring the $172 million tranche.

“Since the company’s share price has been in single digits for over a year now, FCCB holders are not keen to convert their debt into equity,” said the banker.

The Economic Times reported

MC: Wind sector hopes for better times ahead

2 July 2019: In the last two years, only 15 percent of India’s annual installed wind energy manufacturing capacity of 10 gigawatts (GW) has been utilised, according to the Indian Wind Turbine Manufacturer’s Association (IWTMA).

At a recent meet with the Ministry of New & Renewable Energy (MNRE) and the renewable energy sector, members of the wind energy industry raised concerns over the current state of the sector. The low capacity utilisation of wind energy is not sustainable for the sector and has affected 4,000 small and medium enterprises and 2 million jobs, according to chairman of IWTMA, Tulsi Tanti.

“The wind energy sector has been reeling under tremendous pressure and struggling with the transition from feed-in tariff (FiT) to reverse bidding, with tariff cap regime resulting in very low tariff. The tariff discovered is so low that it is neither bankable nor sustainable. Due to this, irrespective of bidding of 17 GW, the actual installation is around 700 MW.” At this rate, achieving the target of 175 GW of energy from renewable sources by 2022 will be a big challenge, noted a press release issued by IWTMA.

Until 2017, wind tariffs were set under the feed-in tariff policy mechanism which offered long-term contracts to renewable energy producers. In February of 2017, the union government moved to a competitive bidding process for wind energy, reverse auction, which dropped the tariffs and impacted the wind energy capacity addition. The Indian government has a target of installing 175 GW of renewable energy by 2022 which includes an allocation of 60 GW from wind.

Majors of the renewable energy sector in India made policy recommendations to the MNRE at the annual meeting, Chintan Baithak, held on May 7, coinciding with the 2019 general elections.

Meeting wind energy targets

There are varied opinions within the wind power industry about meeting the wind energy targets for 2022, as set by the government.

In its outlook for India’s RE sector, Fitch Solutions Macro Research said the country is likely to install 54.7 GW of wind capacity by 2022 against the 60 GW target for energy from wind, set by the government.

However, Vinay Rustagi, the managing director of Bridge to India, a renewable energy consulting firm, explained that their estimate for March 2022 is lower – at 51 GW – effectively meaning an addition of 16 GW in total in the next three years to the current installed wind energy capacity in the country. “There’s already about 11 GW under construction now and a significant uplift in that number is not realistic, given the land and transmission constraints.”

According to D. V. Giri, secretary general, IWTMA, the total installation of wind energy in India as of March 31, 2019, is 35.68 GW. “The total bids awarded by Solar Energy Corporation of India (SECI), National Thermal Power Corporation and state bids are 13,252 MW (13.2 GW). These projects can get commissioned before March 2022 considering 18 months as execution time. As of now, the government plans to announce 10 GW per annum in 2019-20 and 20-21, out of which 15 GW can get announced and awarded up to September 2020 and it can get completed by March 2022. Though this adds up to 64 GW, meeting the target, the plan comes with a lot of ‘ifs and buts’ on land allotment by state governments, connected right of way issues and alignment between developers and Power Grid Corporation of India Limited for connectivity.”

The current figure of installed wind energy will have a capacity addition of 28.2 GW between now and 2022, considering that state bids aren’t forthcoming, and the procurement model is dependent on SECI alone. If one were to work on the probability that around 50 percent of the projects will be commissioned, around 14 GW will be added to the current capacity, totalling 50 GW, said Giri.

However, a senior official of the MNRE, who did not want to be named, said that since the sector has gone through a transition from FiT to competitive bidding last year and added that, “It was very difficult for the states to absorb this in such a short period of time. That is one of the reasons why commissioned projects this year have been lesser than last year. Now, wind is doing well, with some projects being commissioned and others being tendered. For instance, Gujarat’s tender for wind this year has done very well and SECI is coming up with a new project.”

Kasturirangan, chairman, Indian Wind Power Association (IWPA), believes the SECI bid by itself is not going to help in meeting required numbers. “When it comes to bids by SECI, the participation is only for those who install 50 MW and above—as a result, those who meet these numbers participate in the bids. Developers who want to install less than 50 MW, should be given a chance so they can contribute to the generation capacity as well.”

As per SECI’s 2017 call for wind power projects, under the MNRE’s scheme for setting up of 2000 MW ISTS-connected (interstate transmission system) wind power projects for interstate sale of wind power at a reverse auction, eligible bid capacity is a minimum 50 MW and maximum 400 MW by a bidder.

Besides SECI bids, investors who want to install windmills in India must first have the facility, which is not always the case with smaller setups. Also, if a developer is purchasing a higher capacity of 15 MW, the machine manufacturer gives a concession, but not for lower capacities like 2 MW or 4 MW for example. Ever since the SECI bid system has been introduced, regulators peg the bid prices at a low of Rs. 2.40 or Rs. 2.60 per kilowatt-hour.

Kasturirangan recommended that to ensure that developers both big and small are included in the system, a reasonable price must be fixed by the regulator of each state, which is higher than the SECI bid price, which will benefit small developers. He’s positive that India can achieve its target, provided the Ministry takes everyone along, especially those interested in its growth.

Challenges holding back the wind sector

Short-medium term concerns about the growth of the wind energy sector, revolve around the availability of land and transmission infrastructure. In terms of location, wind is more constrained than solar and the best wind sites like Gujarat and Tamil Nadu, are already taken. Going to states other than these, with lower wind resources, increases the cost of power to over Rs. 3.00 per unit. Moreover, in recent months, distribution companies (discoms) are prepared to pay higher prices.

The other challenge facing wind is that its generation profile is more skewed towards night and during monsoon, also periods of low power consumption. This incompatibility with the demand profile is likely to become a major constraint in the future as the focus shifts towards grid stability and meeting peak power demand, stressed Vinay Rustagi. On whether storage of wind energy could be a way out, Rustagi told Mongabay-India that, “Wind can’t be stored. Power can be stored with storage batteries, but that increases the cost very significantly and is currently not seen as viable. However, improvements in technology are expected to make storage acceptable in the next 3 to 5 years.”

Giri adds that the paradigm shift from FiT to e-reverse auction with a tariff cap without any transition period has led to a total collapse of the entire ecosystem. “The biggest challenge is that the manufacturing capacity of 10,000 MW with 80 percent localisation is chasing a market of 1,500 MW or 15 percent utilisation. Currently, the industry is dependent on a single procurement agency of SECI. Also, SECI bids have shut down state procurement, which was once the main market.”

The fall in tariff was forced down in a slow market and has become the benchmark across India. This has led to no procurement by states.

Despite an attempt to re-open old power purchase agreements (PPAs), power has been curtailed during high wind season and there have been tremendous delays in payment by financially strapped distribution companies. Furthermore, the competitive bidding procurement model has led to a total collapse of the small domestic investor whose purchase size is around 5 to 15 MW per annum. In such a scenario, a robust supply chain of the country with over 4,000 small and medium enterprise vendors in the wind energy sector and potential of high job creation has become questionable. Also, frequent changes in policy, non-bankable/ unviable tariff has sent a negative signal to bankers, financial institutions and private equity funds.

Experts from the wind industry have made policy recommendations to the government for a sustainable regime that can boost the sector to meet its targets. Photo by Shankaran Murugan/Wikimedia Commons.

Admitting there are issues which need to be addressed, the MNRE official said, “When it comes to physical financing of wind power projects, earlier, if anyone had money, they could set a couple of windmills and get the required funding. However, owing to competitive bidding now, the size of the tenders has increased significantly. So, financing large-scale projects will need a different kind of financial model. Projects that are 25MW or of lesser capacity are not covered in the competitive bidding guidelines. If something can be done for projects that are of 25MW capacity or lesser, it will create a new market for wind. However, that can be done through FiT or competitive bidding.” This is not yet clear and is an issue that the state regulator will have to take a call on. Also, it is a bit of a challenge as to how we can give the required push to that area, he added.

Kasturirangan believes foreign funds through big IPPs is not enough to take up the installation of wind energy generators. Instead, it should be inclusive growth. “Those who want to generate wind energy and have been pushing the sector for the last 20 years, should be allowed to participate and install windmills, not that those who take foreign funds and put the quantum of megawatts, it is not that they alone who can take the country ahead. We raised this with the MNRE and they assured us of participation, but nothing concrete has happened,” he rued.

Experts hopeful of the way ahead

Following May’s Chintan Baithak meeting between the government and industry, is there a likelihood there may be some change in policy? Rustagi states, “I don’t think there’s a choice. The sector is hurting badly because of issues related to policy, execution and financing. Urgent action is needed to revive investor sentiment and improve processes across the board. At the same time, it’s too early to say how the situation will play out given the political uncertainty.”

Giri believes that state-of-the-art turbines manufactured in India can find acceptance in different geographies of the world to boost exports. “The need of the hour is to increase the export incentive from 3 percent to 10 percent to take care of the disadvantage of freight logistics and inadequate lines of credit.”

The 2018 government order of waiving off inter-state transmission charges up to 2022 has given a boost to the sector and will be focussed in areas where the potential of wind energy is high. Additionally, with the new policy that the MNRE has initiated, of re-instating a solar park as a renewable energy park, will also spur the wind energy in India, the MNRE official said.

Giri, however, is hopeful of the progress of the recommendations noting that even though the meet was held when elections were on, the recommendations made by the industry will be taken up with the new government since it has expressed commitment to targets in onshore and offshore wind. He added that the industry is committed to localisation, but it will be dependent on large capacity addition of around 6 GW per annum and about 1GW to 2 GW of exports.

Multiple procurement models of central and state, open access for inter-state transaction with CTU waiver and uniform wheeling/banking policy can drive capacity addition to greater heights, Giri said on a positive note.

As reported on moneycontrol

ET: Banks have to decide on fate of 150 borrowers by July 7

24 June 2019: Banks have just about a couple of weeks to decide the fate of more than 150 borrowers, which include sugarmaker Bajaj Hindusthan, energy companies RattanIndia Power and Suzlon and other infrastructure and road builders as the 30-day review period for these loans ends on July 7.

The new framework for resolution of stressed assets issued on June 7 requires banks, financial institutions, non-banking finance companies (NBFCs) and asset reconstruction companies (ARCs) to decide on a resolution plan and sign an inter creditor agreement (ICA) after a 30-day review period.

Alternatively, lenders can decide to take these accounts to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC).

It is estimated that banks have to decide on the way forward for distressed debt of at least ₹3 lakh crore, assuming an average loan outstanding of ₹2,000 crore for these 150-odd companies.

“All lead banks have started joint lenders’ meetings to decide the course of action on these accounts and assess whether there is scope for restructuring. Banks will have to take a decision on many of these accounts, especially those not yet admitted to NCLT,” said a senior executive in charge of recoveries at a public-sector bank. “The provisioning burden does not kick in right away but banks will have to make additional provisions if they cannot solve the issue in the next 180 days.”

The central bank circular says that if a resolution plan is not implemented within 180 days from the end of the 30-day period, banks have to make an additional 20 per cent provision. Another 15 per cent provision has to be made if a plan is not implemented within a year. These provisions are in addition to the provisions already held or made as per the asset classification. Past experience on lenderinitiated restructuring plans has been disappointing.

“Almost all the 590 restructured accounts in the corporate debt restructuring (CDR-II) failed. The list of accounts covered by June 7 circular of 150 or more accounts is not a new list, and many of them were part of earlier reviews,” said Harish Chander, a resolution consultant.

“With great effort, lenders were able to cover 3-4 accounts under successful restructuring. I think it makes sense for lenders to go through IBC process, as we have seen in Jet Airways.”

Limited capability of borrowers to meet financial commitments also hampers attempts at a workable restructuring plan.

The resolution plan involves promoters bringing in fresh equity or banks trying to change company management, both of which are difficult to achieve, Chander said. He expects companies in the infrastructure and manufacturing industries to be the first to be acted on.

Lenders have been given complete discretion to design and implement resolution plans. However, higher provisions in case of failure for a plan could be a deterrent.

The Economic Times reported

ET: Suzlon offers to sell majority stake to Brookfield for settling loans

24 June 2019: Suzlon Energy has told its lenders that Canadian investor Brookfield is keen to acquire majority stake in it, which would help the cash-strapped renewable energy company settle its loans if the lenders were to give a waiver, people involved with the development said.

Suzlon has offered a one-time settlement proposal to its lenders that entails potential stake sale to Brookfield that would infuse additional equity in the company, and a considerable amount of waiver of the debts by lenders including foreign currency convertible bondholders, which could eventually help the loss-making company to scale up its operations and meet the remaining financial obligations.

“The lenders have been involved in the resolution plan,” a person involved with the development said.

“Suzlon had interest from a few entities, which lenders knew, but it has decided to go ahead with Brookfield while submitting the one-time settlement offer.”

Suzlon hopes to complete due diligence in around a month and close the deal in 3-6 months sources said.

“Brookfield had done extensive due diligence of Suzlon’s operation and maintenance arm last year, which will account for the majority of the company’s valuation,” one of them said. “It should not take much time once the banks agree to the plan.”

Suzlon declined to comment, while Brookfield did not respond to ET’s queries as of press time Sunday.

Suzlon had defaulted in repayment of principal and interest to lenders worth .Rs. 412 crore towards term loans and working capital facilities as of end-March. It also defaulted in making payments to certain overdue creditors.

This default gives right to the holders of its unsecured FCCBs worth Rs 1,205 crore, which are due for redemption in July 2019, and to the banks who have issued standby letter of credit for a loan taken by a subsidiary company amounting toRs 3,938 crore, to recall these bonds and facilities immediately.

Suzlon’s decision to proactively offer a one-time solution to the bankers is an attempt to assuage lenders to seek more time to resolve the issue and prevent them from recalling their facilities.

Suzlon has net term debt, including FCCB, of Rs 7,761crore, and working capital debt of Rs 3,380 crore.

The company had earlier said it will reduce debt by 30%-40% by asset monetisation, primarily by selling stake in its operations and maintenance subsidiary Suzlon Global Services, which the company had pegged at an enterprise value of Rs 8,000 crore. But the deal did not go through.

A wind turbine maker from Denmark had shown interest in buying stake in Suzlon but talks failed, the sources said. Brookfield put up a bid after that.

Suzlon, once a well storied fast growing wind turbine maker founded by Tulsi Tanti, reported net loss of Rs 1,537 crore in FY19 due to low sales volumes, foreign exchange losses, impairment losses and finance costs, resulting in negative net worth.

The fall in the value of rupee, coupled with declining share prices, added to Suzlon’s woes as it has no option but to redeem the bonds.

“There is no official offer made to the FCCB holders yet,” said one of the executives involved. “Some big bondholders had earlier indicated they are not interested in renegotiations.”

The Economic Times reported

TOI: Suzlon may default on Rs 1.2k-cr FCCBs due July

11 June 2019: Suzlon, India’s largest renewable energy solutions provider, is staring at a default of Rs 1,205 crore on repayments of foreign currency convertible bonds (FCCBs), which are due for redemption next month.

The Pune-based company is facing the liquidity crisis as it has no resolution plan in place. Suzlon had planned an equity transaction with an investor, reported to be Danish wind turbine manufacturer Vestas, to meet its financial obligations, but the deadline to seal the deal lapsed last week.

The potential investor was to infuse equity in Suzlon, which could see the exit of promoter Tulsi Tanti and investor Dilip Shanghvi of Sun Pharma from the company that has over 15GW of wind assets under its service in 18 countries.

Tanti holds about 20% in Suzlon, but 76% of his stake is pledged, while Shanghvi owns around 19% in the company, the shares of which are trading at Rs 5. In 2008, the Suzlon stock was trending at Rs 469. However, the deal with the potential investor has an extension clause. But a new timeline, if any agreed upon, couldn’t be ascertained immediately.

In a statement, Suzlon said that it is committed to reduce its debt and is progressing on strategic initiatives being undertaken. “We do not comment on specific discussions with any specific party at this point. We shall ensure necessary disclosures at the appropriate time,” the spokesperson said.

Suzlon had a debt of Rs 11,141 crore as on March 31, 2019. Its losses widened from Rs 384 crore in fiscal 2018 to Rs 1,537 crore in fiscal 2019 due to lower volumes, foreign exchange losses and finance costs, thus resulting in a negative net worth.

The financial crisis forced Suzlon to default in repayment to some domestic lenders and other creditors. Suzlon had earlier said that the default under term loans and working capital facilities gives unsecured FCCB holders and banks (that had issued a letter of credit for a loan of Rs 3,924 crore) the right to recall the bonds and facilities immediately. The potential investor, which had made a non-binding offer, was also expecting lenders and FCCB holders to waive a considerable amount of debt.

Besides equity infusion and expecting a debt waiver, the investor was to buy one of the units of Suzlon, reportedly the operations and maintenance services (O&M) business in India.

Debtwire in a recent report said that should the deal with Vestas fail to materialise or the sale of the O&M business is not reached in time, Suzlon’s prospects appear bleak. The company might have to work with bondholders on a potential restructuring. Debtwire also noted that Tanti would want to avoid an NCLT-led insolvency process as restrictions on promoters regaining control of a bankrupted company mean he would lose Suzlon. Likewise, FCCB holders may also want to avoid an NCLT process because there is a strong possibility that Suzlon does not have enough distributable value to fully compensate secured lenders much less unsecured ones, Debtwire said.

The Times of India reported