Suzlon Energy (BOM:532667) will fail to repay $209 million of debt due this week in India’s biggest ever convertible bond default.
The world’s sixth largest wind turbine manufacturer tried to get a four month extension, but that request was rejected by bondholders.
Maturing bonds include a zero-coupon note with a face value of $200 million and a 7.5% interest rate, and a note for $20.8 million – the total default is $209 million after redemption premiums are factored in.
Suzlon is putting on a brave face, but this is the second time the company has asked for a debt extension this year.
It received a 45-day extension on $360 million in convertible notes due in June – the company borrowed $300 million and sold two Indian wind farms to make good.
That brings the company’s debt to $2.8 billion, including $965 million in revolving facilities related to acquisitions made before a supply glut depressed turbine prices. Suzlon’s main lender is the State Bank of India.
The news caused yields for the company’s $175 million, 5% convertible debt due in April 2016 to surge 7.7%, and the company’s share price slipped 2.4% on India’s stock exchange.
Like other companies in India, Suzlon’s difficulties stem from taking advantage of "inexpensive" foreign currency convertible bonds when their share prices were high and the rupee was stronger. In the past three years, Suzlon’s stock has dived over 83%, wiping $2.5 billion from its market value.
The company currently has $7.2 billion in orders on its books, but it has posted losses for the last three years and is struggling to raise the working capital to fill them.
It’s expects to make $60 million for the sale its manufacturing business in China, and is looking to recoup $217 million from a division of Edison International for turbines sold for an Illinois wind farm. Edison says Suzlon hasn’t met the conditions necessary to be paid.
Suzlon employs 13,000 people worldwide and has 20,000 megawatts (MW) of wind energy capacity installed in 30 countries as of the end of 2011. The company sells one of the most comprehensive product portfolios – ranging from sub-megawatt on-shore turbines at 600 kilowatts (kW) to the world’s largest commercial 6.15 MW offshore turbine – built on a vertically integrated, low-cost, manufacturing base. Suzlon has a 95% stake in Germany-based REpower Systems AG (ETR: RPW).
Loading...