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Suzlon becomes first co to sell bonds worth $647 mn while in CDR

Beleaguered Suzlon Energy on Monday raised USD 647 million in bonds overseas, becoming the first domestic company to attract investors while already in debt recast, merchant bankers to the deal said.

Mumbai: Beleaguered Suzlon Energy on Monday raised USD 647 million in bonds overseas, becoming the first domestic company to attract investors while already in debt recast, merchant bankers to the deal said.

"Suzlon today successfully sold USD 647 million worth of five-year dollar Reg S (regulation S) bonds at a coupon of 4.97 percent to the US treasury. This is the first ever credit enhancement bond sale by a domestic firm," Rohit Chatterjee, Head of Investment and Corporate Banking at JP Morgan India said.

"It also is the first such issue from entire Asia, excluding Japan," he added.

In other words, this bond sale is unique as Suzlon is the first-ever domestic corporate to get a funding boosting while in CDR.

He further said the sale programme was comfortably oversubscribed but did not put a number to it. He added the co-lead banker to the deal was SBI Caps.

A Suzlon spokesperson refused to comment saying they have to first report to the exchanges before commenting to the media.

When asked about such a tight pricing for a near bankrupt company like Suzlon, Chatterjee said the good pricing is due to the fact that the issue is backed by a standing credit facility from State Bank of India, which also is the largest creditor to the Pune-based company and lead banker to its Rs 9,500 crore CDR in January.

He said, accordingly, the issue carries a provisional rating of Baa2 from Moody's, which is on par with the rating that the nation's largest lender enjoys from the same agency.

Chatterjee said, being Reg S bonds, the issue was sold to 75 accounts from Asia (89 percent) and Europe. While 60 percent of investors were intuitions like banks and MFs and insurers, the rest constituted private banking clients, he added.

The proceeds from the bond sale will not go into the company's account but to the bankers and was necessitated by the fact that Rs 9,500-crore CDR did not include the forex loans.

The January 24 CDR was necessitated by the FCCB default.

In that sense, the bond sale is part of the debt restructuring package by Suzlon Energy, which is the fifth largest wind turbine maker in the world.

The case is unique as the company has just undergone a CDR and banks are ready to help the troubled company as they feel that it would be better for them to help Suzlon finance the USD 650-million worth of foreign maturing over the next one year or so, loans at one go and not in installments, say the sources.

The CDR also involved a two-year moratorium on principal and term-debt interest payments, apart from a a fresh working capital loan of Rs 1,800 crore with a six-months interest moratorium to help the company accelerate execution of its strong orderbook of around USD 7.5 billion.

During the course of the two-year moratorium, interest worth Rs 1,500 crore will be converted into equity, beginning next month, and by September 2014, banks will hold over 32 percent in the company, according to the CDR package.

According to merchant banking sources, Suzlon has forex facilities worth USD 650 million with SBI and nearly a dozen other banks across the geographies wherever it operates. State Bank has an exposure of Rs 3,500 croe to Suzlon, while its other major lenders include IDBI Bank which had lent around Rs 1,700 crore to the company, Bank of Baroda and Indian Overseas with Rs 1,000 crore each.

Axis Bank, ICICI Bank, Punjab National Bank, Central Bank of India, Yes Bank, State Bank of Bikaner & Jaipur, Bank of India, State Bank of Patiala and Oriental Bank of Commerce among others have also lent to the troubled company, which is not facing severe cash crunch.

Suzlon was looking at recasting Rs 11,000 crore of its Rs 14,568 crore domestic loans (as of the September quarter). This debt works out to be 4 times its equtiy. It sought the debt restructuring process late October.

The CDR was approved after its forex bondholders had in October last rejected its request to extend the deadline for repaying foreign currency convertible bonds (FCCBs) worth USD 221 million.

Merchant bankers also feel that despite being the issuing company near bankrupt, the sale will go through smoothly as it is being backed by SBI and other major lenders.

Suzlon stocks are trading as much as 96 percent below its life-time high of Rs 459.85, peaked in early 2008, when the global wind energy sector was booming. Today, it closed at Rs 13.50, up from Rs 13.45 last Friday on the BSE, whose main gauge shed 0.30 percent.