Despite Rs 10,829-crore debt recast package of Suzlon being referred to the corporate debt restructuring (CDR) cell, the package doesn?t have the go-ahead from a majority of bankers, said a senior banker close to the development. However, bankers say that unlike some of the recent high profile cases, Suzlon is not a write-off case and banks are working towards a recast package.
At the November 8 meeting of the empowered group of lenders at CDR cell, Suzlon did not receive the necessary mandate from the bankers for admission into the cell. ?As of now only SBI and its associate banks have approved the package. The consortium of bankers will be regularly meeting in the coming days to work out a negotiated debt recast package,? the senior banker said.
On the sidelines of the State Bank of India?s quarterly results conference held on November 9, Pratip Chaudhuri, the SBI chairman, said, ?The banks have referred Suzlon to the CDR cell because we feel there is a case for restructuring. The problem is that Suzlon took short-term liabilities but its buyers will pay over the long term. So, there is a mismatch.? He added the company is in the clean energy space which will do well in future and its orderbook looks strong. A banker from IDBI Bank said, ?Suzlon is not a write-off case because it is in a promising business segment with a strong subsidiary in Germany.?
Suzlon?s main lenders are SBI with an exposure of around R3,500 crore, IDBI Bank with around R1,700 crore, Bank of Baroda at R1,000 crore and Indian Overseas Bank at R1,000 crore. Some of the other lenders to the group with smaller exposures include ICICI Bank, Axis Bank and Yes Bank. The CDR cell typically requires 75% of banks (by value) and 60% of them (by number) to agree to resolve the case under the CDR mechanism.
The senior banker said the lenders have time till February 8 to come up with a negotiated debt recast package to enable the company gain admission into the CDR mechanism. He added that Suzlon?s promoters have agreed to bring in R250 crore as promoter contribution.
The CDR cell is an informal forum of lenders that help debt laden companies to tide through difficult periods with easier loan terms. The empowered group consists of representatives from the lenders to the company who assess the flash report of the company and vote on whether to introduce the account into the CDR cell.
The debt restructuring proposal comes after the company?s foreign currency convertible bonds (FCCB) holders rejected Suzlon?s request to extend the time for the redemption of FCCBs of $221 million due to mature in October. Suzlon had hoped that the extension would have given it time to sell more assets and attempt to collect receivables. However given that the extension has not been granted, Suzlon has defaulted on the redemption of these bonds.
FCCB holders hold the status of unsecured creditors. Bankers say that that if the bondholders carry out a winding up petition the secured creditors will get a priority over the unsecured creditors. Alternatively the unsecured creditors can enter into a negotiated settlement with the other creditors. FE did not receive a response to an email sent to one of the main FCCB holders Blackrock on its future course of action in the Suzlon case.
Suzlon has been under pressure due to a slowdown in global turbine sales and growing debt. In the financial year 2011-12, the company posted revenues worth R21,082 crore with a net loss of R479 crore. As of September 30, 2012, Suzlon reported debts to the tune of around R13,200 crore, of which foreign currency convertible bonds (FCCBs) contributed around R3,500 crore. The company posted revenues to the tune of R659.27 crore in the July-September 2012 quarter and posted a net loss of R546.33 crore.
