Bloomberg News

Suzlon Energy, Barred From Repower Cash, May Sell Assets

March 15, 2012

Suzlon Energy Ltd. (SUEL), India’s largest wind-turbine maker, may sell assets to pay bondholders after being shut out from tapping a 750 million-euro ($982 million) loan raised by its German unit Repower Systems SE. (RPW)

Suzlon can’t use the Repower loan announced March 1 from banks led by BayernLB Holdings AG, Commerzbank AG and Deutsche Bank AG, Repower spokeswoman Caroline Zimmermann said. “This is not possible in the contract,” she said in an e-mail.

Lacking access to Repower’s loan, India’s largest wind- turbine maker will find it difficult to refinance $569 million in foreign currency convertible notes that mature starting in June and may be forced to sell assets, said Atul Gharde, a Hong Kong-based credit analyst at SJS Markets Ltd.

Suzlon may be willing to sell Repower to France’s Alstom SA (ALO) for 1.5 billion euros, the Financial Times Deutschland reported without saying where it got the information. Under pressure from creditors, Suzlon Chief Executive Tulsi Tanti met several potential bidders including General Electric Co. (GE), Siemens AG (SIE) and Alstom, the Wall Street Journal reported yesterday, citing unidentified people.

Alstom Chief Executive Officer Patrick Kron denied the reports, saying he won’t harm shareholders with “adventurous deals” that would require selling shares to raise money in “unfavorable economic conditions.” Suzlon in an e-mail called the reports “totally speculative.”

Suzlon, which on Feb. 17 reported that losses had widened to 2.86 billion rupees ($57 million) in the third quarter from 2.54 billion rupees a year earlier, had its biggest one-day jump in more than a year on March 1 when Repower announced the loan as investors assumed that the funds would help cover repayments.

‘Bad’ for Investors

“This is bad for us investors,” said Raj Kothari, a London-based convertible bond trader at Sun Global Investments Ltd., which owns Suzlon bonds. “The only way out may be to sell Repower cheaply.”

Prices on Suzlon’s 5 percent convertible debt due 2016 in April fell 3.1 percent yesterday, reversing four days of gains, according to pricing data from Barclays Plc. The yield rose by 5.4 percentage points.

SJS Market’s Gharde said Suzlon would probably try other options first, such as raising money by pledging a stake in Repower. Suzlon used a similar strategy to raise loans in India by offering its shares as collateral to banks.

Sell SE Forge?

A more likely asset sale would be Suzlon’s SE Forge Ltd. unit, which makes metals castings used in the wind industry, Gharde said.

Repower provides Suzlon with access to technology and growth in the offshore wind market, especially in Europe, the second-largest market for turbines after China. The parent business only makes onshore turbines.

It took Suzlon four years to buy Repower, beginning in 2007 when it acquired a 7.7 percent stake. Last October it bought out minority shareholders’ remaining 4.8 percent stake. Ownership would bring financial and technological benefits as well as manufacturing efficiencies, Bank of America Merrill Lynch, JPMorgan Chase & Co. and CLSA Asia Pacific said at the time in reports to clients.

Repower had 206 million euros of cash and equivalents at the end of September before it was taken over by Suzlon, according to data compiled by Bloomberg.

To contact the reporter on this story: Natalie Obiko Pearson in Mumbai at

To contact the editor responsible for this story: Reed Landberg at

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