Bloomberg News

Suzlon Can’t Tap Repower Unit’s Loan to Pay Debt

March 15, 2012

Suzlon Energy Ltd. (SUEL), barred from tapping a 750 million-euro ($980 million) loan raised by its German unit Repower Systems SE (RPW) to reduce debt, may sell assets in order to repay bondholders this year.

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

Without 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 ($2 billion), the Financial Times Deutschland reported yesterday 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 today, 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 Options

Suzlon 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.

“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 today, reversing four days of gains, according to pricing data from Barclays Plc. The yield rose by 5.4 percentage points. Suzlon’s shares slid 3.8 percent today.

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

Metals Castings

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 world’s second-largest market for turbines after China. The parent business only makes onshore turbines.

It took Suzlon four years to buy Repower, beginning in April 2007 when it acquired a 7.7 percent stake and gradually expanded its holding. In October it bought out minority shareholders’ remaining 4.8 percent stake. Ownership would bring financial and technological benefits, as well as manufacturing efficiences, 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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