A source told Windpower Monthly that the company is expected to agree a cash-free settlement with the holders of $221 million worth of foreign currency convertible bonds (FCCBs).
The deal is expected to be settled on a cash-free basis, with the issuing of new five-year bonds with a value of around $500 million.
Shares in the firm climbed 6.5% on the Bombay Stock Exchange on Tuesday, seemingly in response to the news.
Suzlon defaulted on the buyback of the bonds in October 2012, making it the biggest FCCB default ever by an Indian company.
The turbine manufacturer issued $200 million zero-coupon convertible bonds and $20.8 million 7.5% convertible bonds, but was forced to ask for a four-month extension from bondholders. The request was refused, forcing the default.
Suzlon has been shedding assets and employees as it looks to deal with its debt crisis. Last year, the company entered into corporate debt restructuring in an effort to bring its finances under control.
As a result, chairman Tulsi Tanti announced plans last year to reduce operational and staffing costs by 20% as part of the so-called project transformation.
The company has been selling off "non-critical assets". The latest of these was a 75% stake in its Chinese subsidiary. It was sold at a reduced price compared with a proposed deal back in 2012.
The group has shed 2,000 jobs over the last financial year and has confirmed that further headcount reductions are being planned.
Suzlon's German subsidiary Repower has been hit by its parent's woes, with the manufacturer announcing 750 job cuts, 23% of its workforce, in April 2013.
For the third quarter of 2013, Suzlon posted a 16.5% decline in revenue but showed it had made progress in cutting costs as operating and net losses were both reduced.