Suzlon Energy Ltd. (SUEL) is in advanced talks regarding a $300 million loan as India’s biggest maker of wind turbines seeks to meet its debt obligations.
“We are in very, very advanced stage of discussions with our lenders so we are confident that it will be raised in time,” Chief Financial Officer Kirti Vagadia said in a phone interview.
Suzlon is under pressure to boost orders and generate cash in order to meet debt repayments. In March, HSBC Holdings Plc estimated that Suzlon had $700 million in bond and loan obligations maturing in the next 12 months and an estimated cash balance of 7.5 billion rupees ($136 million).
The dollar-denominated loan under discussion will not place any immediate repayment obligation on Suzlon as its maturity is “not too short term”, Vagadia said. The company’s debt obligations include $358 million of dollar convertible notes maturing June 12 that investors are unlikely to swap for stock that’s trading below the conversion price.
Suzlon said on May 19 it expects to raise as much as a $300 million term loan by next month in time to pay bondholders. It has asked bondholders for a 45-day extension in case of procedural delays. Bondholders will meet on June 11 to discuss that matter, according to Suzlon.
“We are replacing one debt with another debt so probably it will be debt neutral as far as our debt is concerned,” he said.
In October, the company has another $200 million in convertible bonds that mature. Suzlon still plans to sell as much as $500 million in high-yield bonds later this year to help meet its obligations, Vagadia said. He is in the process of selecting “standard international merchant bankers” for the transaction, he said.
The company is also looking to sell non-critical assets that could raise $100 million to $200 million, according to Vagadia, among other options.
Earlier today, the Pune-based company reported a fourth- quarter loss of 3 billion rupees ($54 million) compared with a profit of 2.11 billion rupees a year earlier, the company said today in a statement. The median estimate of six analysts in Bloomberg survey was for a profit of 441 million rupees. The loss was due to “small volume slippage,” Vagadia said
Suzlon’s biggest wind-focused peers reported losses this month as government-backed clean energy incentives were rolled back in Europe and the U.S., and demand slackened in China. Vestas Wind Systems A/S (VWS) fell to a nine-year low on May 2 after saying its first-quarter loss almost doubled. Gamesa Corp. Tecnologica SA (GAM) plunged to a record low on May 10 after reporting an unexpected first-quarter loss, citing lower turbines volumes amid a slowdown in grid connections in China.
Sales at the manufacturer were 66.99 billion rupees, down from 72.8 billion rupees, the company said. Finance costs rose to 4.24 billion rupees from 3.63 billion rupees the previous year. Total expenses increased to 66.1 billion rupees from 65.5 billion rupees, according to the company.
“Despite an extremely challenging business environment we as a group continue to be extremely well positioned in the market place,” Chairman Tulsi Tanti said in the statement, citing the company’s 5.5 percent operating profit margin compared with 2.2 percent a year ago.
Tulsi said the company expects to record a 30 percent growth in revenue for the 2013 financial year at 270 billion to 280 billion rupees. Suzlon fell 0.2 percent to 20.85 rupees in Mumbai.
To contact the reporter responsible for this story: Sally Bakewell in London at Sbakewell1@bloomberg.net
To contact the editor responsible for this story: Reed Landberg at firstname.lastname@example.org