India

India

Key Suzlon lender accepts restructuring plan

Government-owned State Bank of India (SBI) has approved Suzlon’s debt restructuring plan, the struggling manufacturer confirmed in a notification to the stock exchange.

Suzlon has reportedly proposed swapping its unsustainable debt for new, sustainable debt
Suzlon has reportedly proposed swapping its unsustainable debt for new, sustainable debt

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Suzlon's proposal involves swapping its outstanding debt with new, sustainable debt, and its success is crucial to the manufacturer's ability to continue to function, according to its own auditors.

Other lenders will now be asked to approve the plan, with at least a 66% approval rate required, according to Bloomberg Quint. Lenders could also refer Suzlon for insolvency proceedings.

Suzlon has not confirmed the amounts involved, but it had previously been reported that the manufacturer sought to swap INR 113 billion ($1.6 billion) of its outstanding debt with about INR 36 billion of new debt. This would represent a discount of about 68% and would not appear to include debt accrued in the third quarter of its fiscal year.

The company’s net debt grew to INR 129 billion ($1.8 billion) by the end of the quarter ending 31 December 2019, up from INR 122.57 billion three months earlier.

Shares in the manufacturer opened at INR 2.45/share on 20 February, the day on which it informed the Mumbai Stock Exchange of SBI's approval. This marks an 8.89% increase since the Indian financial newswire's story was published at around the close of trading on 19 February.

Windpower Monthly approached Suzlon and SBI for a statement, but the OEM declined to comment on the story, while the bank has not responded.

The manufacturer’s stock price had been falling since its auditors raised “significant doubts” about Suzlon’s ability to continue as a going concern when it released its Q2 financials on 15 November, but spiked on reports of its plans to ask lenders for a discount on its debt, only for it to return to late-2019 levels.

Its auditors repeated the warning about Suzlon's precariousness, when the manufacturer published its Q3 financials on 12 February.

Deloitte, Haskins and Sells reported Suzlon had defaulted on payments to some creditors, some lenders had filed for insolvency proceedings against the manufacturer, and potential investment offers had been withdrawn.

However, they added that Suzlon’s management was “reasonably confident” about its restructuring plan succeeding.

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