Wind turbine manufacturer Suzlon Energy has defaulted on $221 million worth of foreign currency convertible bonds (FCCBs) maturing on October 11, 2012, after it failed to get an extension from bondholders. This is the biggest FCCB default by an Indian corporate, topping Sterling Biotech?s $184-million delinquency in May and takes the quantum of defaults on convertibles to $664 million this year, according to data compiled by Bloomberg.
The agency reported on Thursday that the notes are unsecured and Suzlon won?t be forced to liquidate assets or wind down operations, citing two people with knowledge of the matter.
The Pune-headquartered firm is promoted by Tulsi Tanti and posted a huge loss of R850 crore in the three months to June 2012 following a loss of R437 crore in the year to March 2012, when it reported revenues of R21,082 crore.
Meanwhile, the consortium of lenders to the beleaguered firm, headed by State Bank of India (SBI), has said it would look at ways to restructure the company?s debt now amounting to R14,000 crore. SBI deputy managing director Santosh Nayar said the bank?s exposure to the troubled company was R3,500 crore.
The Suzlon stock closed 2.11% lower at R16.20 on the Bombay Stock Exchange, after falling to R15.70 during the day.
At a meeting held in London on Wednesday, bondholders rejected a request by Suzlon for a four-month extension of the maturity dates of two series of FCCBs. ?It is somewhat disappointing that the bondholders? meetings did not achieve the consensus we were hoping for and the four-month extension sought by us has not been granted,? Suzlon group chief financial officer Kirti Vagadia said, adding taht the company was in talks with bondholders to find a solution. Suzlon, which has lost money for three years, has accumulated $2.8 billion in debt from acquisitions made before a global supply glut depressed turbine prices by 23% from their peak in 2009, according to data compiled by Bloomberg.
Suzlon Energy had issued $200 million zero-coupon convertible bonds and $20.8 million 7.5% convertible bonds, both due October 2012.
On September 18, Suzlon had requested bondholders for a four-month extension to allow it to close out financing measures and meet its redemption obligations in complete alignment with all stakeholders.
In July this year, Suzlon Energy staved off a default paying off a debt of $360 million. Since then, the market has only become tougher for the company.
In a report after the announcement of the June quarter results, HSBC had observed that given expectations of an 8% year-on-year decline in wind turbine installations during 2013, ?we see pricing and margin pressures persisting in the coming months?.
HSBC said internal cash accruals were insufficient to support debt repayments. ?Suzlon remains highly leveraged with net debt to equity ratio of 2.9x as on 30 June 2012 , which has increased from 2.15x on 31 March 2012. We have been highlighting debt repayment risk not only in FY13 but also for FY14,? the brokerage observed.