SBI and IDBI Bank, 2 largest lenders in Suzlon debt recast

Saikat Das
moneycontrol.com

The State Bank of India (SBI) emerged as the largest lender in Suzlon Energy's Rs 13,700 crore debt restructuring case, just referred to the CDR (corporate debt restructuring) cell. With a loan exposure of around Rs 3.610 crore it is the lead bank in a consortium of eight CDR lenders and three non-CDR lenders.

IDBI Bank, which lent Rs 2,008 crore is the second largest lender in the group followed by Bank of Baroda at Rs 970 crore, Indian Overseas Bank at Rs 952 crore. Power Finance Corporation, a non-CDR lender, loaned around Rs 566 crore, sources said.

Restructuring is the process when a borrower fails to repay its loans and asks for relaxation of original terms and conditions. CDR cell is a forum wherein lenders jointly draw a scheme of restructuring defaulting companies. 

"Banks have referred the case to the CDR cell after the company failed to make repayment. The forum will hold a meeting with lenders on November 8 to admit the case. Banks want to draw a comprehensive scheme before it slips into non-performing asset category in their balance sheets. After lenders failed to admit Deccan Chronicle's Rs 4,100 crore recast, it is the first major restructuring involving huge credit lines," a person associated with the restructuring process told moneycontrol.com on condition of anonymity.

Along with the public sector lenders, three private sector banks including Axis (Rs 400 cr), ICICI (Rs 382 cr) and Yes (204 cr) figured in the lenders’ list for Suzlon in the recast process. Power Finance Corporation (PFC), not a CDR member, lent around Rs 565 crore. The forum will admit the case only when 75% of the banks (by value) and 60% of them (by number) agree to resolve the case under the CDR mechanism.

The Reserve Bank of India (RBI) has raised the requirement of provisions against restructured standard account from 2% to 2.75% in its September quarter monetary policy declared on Oct 30. This will eventually erode banks' profit margins.

Exposure at Suzlon Energy debt recast

 

Banks	Loans given (Rs in crore)
SBI	3610
Bank of Baroda	970
Indian Overseas Bank	952
Axis Bank	400
Yes Bank	204
ICICI Bank	383
PFC	565

 

 

 

 

 

 

 

Banks' credit to the fifth largest turbine maker is also in the form of foreign currency apart from domestic loans. With offshore operations some lenders issued credit-linked notes (CLNs), a kind of credit insurance, for foreign currency convertible bonds (FCCBs) of the company. CLN issuers are supposed to repay the bond holders of the company in case of any default.

Also read: Suzlon shareholders' wealth plunges by Rs 4100cr in a year

Tulsi Tanti-promoted Suzlon is reported to have already defaulted on redemption of more than 1,076 crore in overseas convertible bonds, due on November 01, 2012. In the last one month Suzlon shares plunged nearly 13% as against more than 2% fall in the broader sensitive index.

saikat.das@network18online.com