The company has asked the bondholders to hold the fixed instrument while it looks at a one-time settlement plan with the banks and a deal with Brookfield.
Suzlon Energy may default on its Foreign Currency Convertible Bonds (FCCBs) worth Rs 1,200 crore ($172 million), which are maturing on July 16, reports The Economic Times. The company has asked bondholders to hold the fixed instrument even as it looks at a one-time settlement plan with banks and a deal with Brookfield, sources told the newspaper.
The Canadian investor is interested in acquiring equity in the Tulsi Tanti-owned 25-year-old company that has net term debt (including FCCBs) of Rs 7,761 crore and working capital debt of Rs 3,380 crore.
Bondholders can expect a resolution only after a consensus is reached with the banks and Brookfield, the report stated. However, they may not find it attractive to convert their FCCBs into equity at the current juncture. The Suzlon counter is currently trading around Rs 4.80 levels, significantly lower than the conversion price of Rs 15.46.
If Suzlon defaults on these FCCBs, it will be second in a row after 2012. The wind energy company had issued the bonds after it could not meet redemption requests in 2012, leading to the biggest default at that time and ripple effects in other bonds.
The loss-incurring company has already defaulted in March on repayments worth Rs 412 crore on term loans and working capital facilities. Lenders and bondholders had the option to trigger a recall of their capital, but chose not to do so.
Suzlon then offered a one-time settlement to banks and sought a waiver, saying that Brookfield is keen to acquire majority stake in it, the article said.
“FCCB holders don’t have too many options since the secured lenders are yet to approve the debt resolution plan, which hinges on the Suzlon-Brookfield deal going through. If that does not work out, then the lenders would have to look at other options like the Insolvency & Bankruptcy Code and the National Company Law Tribunal route,” the report quotes a source as saying.
A deal with Brookfield would infuse additional equity, but debtors, including FCCB holders, will have to take a substantial haircut on their exposure, sources added.LIVE NOW... Video series on How to Double Your Monthly Income... where Rahul Shah, Ex-Swiss Investment Banker and one of India's leading experts on wealth building, reveals his secret strategies for the first time ever. Register here to watch it for FREE.