The lenders of Suzlon Energy are in dire dilemma on taking a haircut as the wind energy company's debt repayment abilities deteriorate with mounting losses and slipping revenues. According to the banking sources, the management wants the banks to forgo the unsustainable loans and allow more time to repay the rest of the debt. The banks will have to take a haircut of 40-50 per cent in Suzlon to make its operations sustainable, they said.
As of September 2019, the wind turbine maker had a net debt of Rs 12,257 crore. Of the total, the rupee debt comes to Rs 6,913 crore and forex term debt at $52 million (Rs 369 crore). Besides, it has liabilities such as standby letter of credit (SBLC)-backed bonds worth $569 million (Rs 4,024 crore). Its subsidiary AE-Rotor Holding (AERH) BV had issued five-year bonds on March 28, 2013 for $647 million, backed by SBLC facility from various lenders fronted by the State Bank of India (SBI). The foreign currency convertible bond (FCCB) worth $172 million (Rs 1,254 crore) is another liability on Suzlon's books where the company defaulted in July.
The company had defaulted in repayments of Rs 437.50 crore in respect of its term loans and working capital facilities in March 2019, besides failing to make payments to certain overdue creditors. It had defaulted on FCCBs in July. Despite the defaults, the lenders have allowed continuation of operations, permitting usage of 90 per cent of cash inflows towards business requirements and have invoked the Inter Creditor Agreement (ICA) mechanism under 'Project Sashakt' for debt resolution. The creditors-led debt resolution needs to be completed within the RBI-allowed 180 days, which will end on January 6. The creditors are allowed to extend the time for a month or so with the permission of the court.
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"The banks have its limitations. If we take the haircut, it can be questioned in future. The debt waiver is ideal to do in consonance with the court, in this case Insolvency and Bankruptcy Code (IBC)," said a Mumbai-based banker. The company will have to file for bankruptcy under Insolvency and Bankruptcy Code.
The company said in its second quarter presentation that it has submitted restructuring plan to the lenders and is working to achieve a feasible resolution plan, which envisages segregating total debt into sustainable and unsustainable debts.
The lenders of Suzlon have given a long rope for survival - restructured its loans in 2013; gave time to sell-off assets to settle loans and facilitated Sun Pharma chairman Dilip Shanghvi to come in and financially aid the company. When many business men surrendered to bankruptcy, Suzlon founder Tulsi Tanti managed to scrape through debt restructurings.
In the last financial year, Suzlon posted a loss of Rs 1,537 crore on a revenue of Rs 4,978 crore. The company posted losses of over Rs 1,100 crore in the first two quarters of this financial year. After the second quarter results, chief financial officer Swapnil Jain said that their operations are at a sub-optimal level due to liquidity challenges being faced by the company.