Suzlon Convertibles Slump as Rescue Threatened: India Credit
March 7th, 2013

The convertible bonds of Suzlon Energy Ltd. (SUEL), the Indian wind-turbine maker that defaulted last year, are falling from a five-month high as a cash squeeze threatens its efforts to reorganize debt.

The company’s 5 percent equity-linked dollar securities due April 2016 slid 8.3 percent from a Feb. 6 peak to 50 cents on the dollar, prices from Jefferies Group Inc. show. Offshore Asian fixed-income notes that can be exchanged for shares lost 0.3 percent in the past month, according to a Nomura Holdings Inc. index. Suzlon’s bonds rallied 17 percent in January as its Indian lenders approved a two-year moratorium on payments on local borrowings.

India’s largest wind-turbine maker needs money to repay foreign creditors and boost equity capital under the liability- restructuring agreement with lenders. Suzlon’s founders sold part of their holdings last month and the firm plans to sell “non-critical” assets including China unit Suzlon Energy (Tianjin) Ltd. to raise money after international bondholders rejected a request for an extension on payments.

“I feel there’s more pain left in Suzlon,” Raj Kothari, a fixed-income trader at Sun Global Investment Ltd. in London, said in an e-mailed response to questions on March 5. “Founders may have to sell more shares to save the debt-restructuring plan. Suzlon should come up with a precise roadmap on repayments.”

Suzlon’s 2016 notes tumbled to an all-time low of 35 cents in October, when it failed to repay $209 million in India’s biggest convertible-bond default. The company reported an unprecedented loss of 11.56 billion rupees ($211 million) for the last quarter of 2012 as dwindling working capital reduced its ability to complete orders.

Selling Shares

The company’s shares plunged 34 percent, the most in four years, in Mumbai on Feb. 28 as its founders sold 109.9 million shares as part of the debt-recast plan. There’s no need to sell more shares for cash, Chief Financial Officer Kirti Vagadia said in a phone interview on the same day. The stock slide reflected investor concern Suzlon’s main stakeholders are resorting to distressed-asset sales, according to Destimoney Securities Pvt.

“Founders selling their stake to raise funds for repaying debt shows their desperation,” Sudip Bandyopadhyay, chief executive officer at Mumbai-based Destimoney, said Feb. 28.

A consortium of 19 lenders led by State Bank of India approved the proposal to cut interest rates on loans and extend repayments over eight years after the two-year moratorium with effect from Oct. 1, Pune-based Suzlon said in an exchange statement on Jan. 24.


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