Suzlon Energy has been hit with India’s largest convertible bond default to the tune of US$209 million.
Suzlon defaulted late last week after bondholders rejected its request for a four-month extension. The company has started talks with senior-secured lenders and bondholders on options.
Suzlon requested the extension on the bonds’ maturity to Feb. 11, 2013 saying it needed time to raise funds from fresh debt and the sale of non-critical assets, among others.
Suzlon’s request for a moratorium on the debt was its second this year. The company got a 45-day extension to avert default in June on US$360 million of convertible notes. The bonds were repaid on July 27 after the company borrowed US$300 million from banks and sold two Indian wind farms.
Suzlon has accumulated US$2.8 billion in debt mainly on losses in the past three years. This total includes US$965 million in revolving facilities from acquisitions made before a global supply glut depressed turbine prices by over 20% from their high in 2009.
Since the notes are unsecured, Suzlon won’t have to liquidate assets or shut down operations but is expecting fresh working capital from its banks so that operations continue, industry sources said.
The State Bank of India, Suzlon’s main lender, said the Indian banking system has loaned US$2.7 billion to the Pune-based company, including US$663 million from SBI.
Suzlon’s shares have lost 72% of the value in the past two years. The yield on the company’s US$175 million, 5% convertible debt due April 2016 surged 7.7 percentage points to a record last week.
“We are looking at ways to resolve the issue and need time to sort this out,” said SBI Deputy Managing Director Santosh Nayar.
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