Suzlon Energy Ltd. (SUEL) advanced the most in almost three months in Mumbai trading on a plan to raise as much as $800 million this year in loans and a bond sale, easing pressure on the company to sell its Repower Systems AG unit.
Suzlon rose 6.7 percent in the city, the biggest gain since March 1. A group of about 20 banks agreed in principle to extend a term loan of as much as $300 million, India’s largest wind- turbine maker said May 18. The company is also working on plans to sell as much as $500 million of high-yield bonds this year.
“Selling Repower doesn’t look too likely anymore,” Rosita D’Souza, an Elara Capital Plc credit analyst, said in Singapore.
Suzlon rose 1.35 rupees to 21.45 rupees in Mumbai, bringing 2012’s gain to 19 percent after a 67 percent slump last year.
SBI Capital Markets Ltd., one of the lead banks for the loan, said it’s “extremely confident” of closing the deal in time for Suzlon to meet its June bond repayments. The turbine maker is working on plans “to monetize non-critical assets,” according to an e-mailed statement on May 18. Repower is the company’s “most critical asset” and isn’t for sale, Chief Financial Officer Kirti Vagadia said on April 27.
Suzlon probably plans to transfer cash from the unit to help meet repayments, Charanjit Singh, an analyst at HSBC Holdings Plc, said in an e-mailed note to investors.
Singh estimated in March that Suzlon had $700 million in bond and loan repayments maturing in the following 12 months and an estimated cash balance of 7.5 billion rupees ($136 million).
Obligations include $358 million of dollar convertible notes maturing June 12 that investors are unlikely to swap for stock that’s trading 78 percent below the conversion price.
Suzlon was studying options for Repower including a sale of at least 1.5 billion euros ($1.9 billion) or a listing, people with knowledge of the matter said last month. Under pressure from creditors, Suzlon Founder Tulsi Tanti met France’s Alstom SA, General Electric Co. and Siemens AG (SIE) about a possible sale, the Wall Street Journal said in March. Hamburg-based Repower is Europe’s third-largest offshore wind turbine supplier.
“Repower sale discussions, if any, would most likely be discontinued,” Atul Gharde, a Hong Kong-based credit analyst at SJS Markets Ltd., said by e-mail today. “If the bank loan deal goes through, then Suzlon should be in a much better position to meet its obligations for the year.”
While Suzlon plans to sell as much as $500 million in bonds this year, it hasn’t appointed bankers and is “waiting for the right window,” said Vikas Rathee, corporate finance chief, in a May 18 interview. “The market has to be there.”
‘Out of Woods’
Suzlon has another $200 million in convertible debt due in October. The company requested a 45-day extension on two bonds maturing June 12 in case of procedural delays in obtaining the term loan of as much as $300 million, Rathee said. Bondholders are supportive and won’t impose any penalties, he said.
The dollar term loan will probably be raised by Suzlon’s foreign holding company AE-Rotor Holding BV and won’t need fresh collateral or increased Repower leverage, Rathee said. Raising the loan abroad will allow Suzlon to re-balance debt across the group and reduce interest costs, he said. “When we’ve paid these bonds, we’ll be out of the woods,” Rathee said.
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