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Suzlon gets approval for debt restructuring proposal of $1.8B

CVCI struck a multi-bagger in its pre-IPO investment in Suzlon in 2004 and still retains stake; IDFC PE has seen its holding value shrink 85%.

Wind turbine manufacturer Suzlon Energy Ltd has got the formal approval for its proposal to restructure domestic debt from the corporate debt restructuring (CDR) cell, according to a BSE disclosure.

A consortium of 19 banks approved the CDR package of Rs 9,500 crore ($1.8 billion) including a two-year moratorium on principal and term-debt interest payments, 3 per cent reduction in interest rate and a six-month moratorium on working capital interest.

As part of the package, Rs 1,500 crore (two years’ interest payment during moratorium) will be converted into equity or equity-linked instrument over the next two years, to bring stronger financial stability and there will be a 10-year door-to-door back-ended repayment plan.

“This is a major step forward in our efforts to achieve a sustainable capital structure. The terms of the package include enhanced working capital facilities, a reduction of interest rates of nearly three per cent and conversion of interest costs into equity; these are key enablers towards normalising our business,” said Kirti Vagadia, CFO of Suzlon.

“We continue to be in constructive dialogue with majority of our bond holders across all the four series and this development will help provide further visibility towards finding a consensual solution at the earliest,” she added.

There will also be an enhancement of working capital facilities by about Rs 1,800 crore ($350 million) that will allow Suzlon to accelerate the execution of its order book.

The group’s promoters would also bring in Rs 250 crore equity within a stipulated time frame, of which Rs 62 crore had already been infused, the company said.

PE-backed Suzlon’s shares closed down 2.96 per cent at Rs 18.05 on the BSE in a weak Mumbai market on Thursday.

Suzlon is the oldest unliquidated investment by Citigroup Venture Capital International (CVCI) in India, made way back in 2004. The PE firm had struck one of the biggest multi-baggers in its part-exits during IPO and post listing of Suzlon. It still retains 1.4 per cent stake in the company.

In contrast, IDFC Alternatives or IDFC PE is sitting on huge value erosion. It had swapped its stake in the components arm of Suzlon Energy for an equity interest in the listed parent company a little over two years ago.

IDFC PE picked up 17.1 per cent stake in Suzlon’s arm SE Forge for Rs 400 crore in September 2008 and the value of its holding is currently pegged at just Rs 58 crore.

(Edited by Sanghamitra Mandal)

(CVCI Growth Fund I)

Citi Venture Capital International Growth Fund is a $1.6 billion private equity fund managed by Citi Venture Capital International. It provides capital to companies operating in Asia and emerging European countries. The fund seeks to invest in IT services, business services outsourcing, retailing, media, telecom, renewable energy and financial service sectors.

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