Suzlon may escape NCLT route as lenders explore debt restructuring

Suzlon Energy, the country’s leading wind turbine maker, could escape insolvency as lenders to the company are exploring the option of debt restructuring. 

The Centre’s latest diktat to public sector banks (PSBs) to avoid the insolvency route would favour the company. 

Suzlon has a debt of Rs 7,000 crore, and is scouting for new investors by paring promoter stake. Lenders to Suzlon are holding talks to explore ways in which it can help revive operations of the company through debt restructuring. 

They may choose not to take it to the bankruptcy court, a top public sector bank official told this paper.  State Bank of India, Punjab National Bank, Union Bank and Bank of Baroda are major lenders to the firm. 

“We want to ensure that the company becomes viable with the right amount of debt. At present, the debt levels look unsustainable,” the bank executive said. He added that the lenders are in discussion to bring down debt of the company to a level that matches its cash flow and “improves the company’s finances.”

For the quarter ended June 30, 2019, Suzlon reported a net loss of Rs 337 crore and revenue of Rs 833 crore. As of June 2019, the company’s consolidated net term debt, including foreign currency convertible bonds (FCCBs), was Rs 7,751 crore and working capital debt was Rs 4,000 crore. This year, Suzlon defaulted on a payment to its bondholders for $172-million in FCCBs which were due on July 16. The $172 million was part of a bond series that was first restructured in 2014.

In an emailed response, the spokesperson of Suzlon said lenders along with the company are “working hard on a sustainable resolution plan to preserve the value of the company”.  He referred to a prior communication of the company to the exchanges which said, “The debt resolution and revival plans have never been dependent on any single option.” 

The company had also informed the exchanges in July that the lenders already signed an inter-creditor agreement. In terms of the circular of the Reserve Bank of India (RBI) dated June 7, 2019, the lenders have time till January 2020 to work on a sustainable resolution plan before taking any extreme step. 

The bank executive also said that the government has instilled confidence among bankers by asking them to ensure that firms are dragged to the National Company Law Tribunal (NCLT) as a last resort. 

The chief executives of PSBs had met Finance Minister Nirmala Sitharaman last week and expressed their concerns related to the Insolvency and Bankruptcy Code. 

The finance ministry has also issued a diktat to the banks recently, telling them to look for alternative resolution mechanism outside the IBC.

This is as part of new set of reform measures that banks need to follow.

In 2012, Suzlon announced plans to enter corporate debt restructuring (CDR). The company has been shifting its goal post to exit the CDR ever since, which was earlier set for March 2017. The timeline was later pushed to the first-half of FY18 and has not been met yet.

Suzlon’s attempts at bringing an investor are not bearing results. Several reports cite separate talks with Vestas Wind Systems and private equity firm Brookfield are not moving forward. In earlier attempts at divestment, Dilip Shanghvi in 2015 picked up a 23 per cent stake for Rs 1,800 crore in the company. The relief, however, was short-lived and the company slipped back into the red in FY18.

 

(With inputs from Amritha Pillay)