Lenders to Suzlon Energy Ltd. are leaning towards initiating recovery proceedings after attempts to draw new investors to the company fell through, two bankers with direct knowledge of the matter told BloombergQuint on conditions of anonymity.
The debt-laden Suzlon Energy, which has already gone through debt restructuring in 2013, has seen two potential investors back out in the past six months, leaving lenders with fewer options. The company owes nearly Rs 10,000 crore to its domestic lenders in term loans, working capital debt and unpaid interest.
According to the bankers quoted earlier, a recent technical evaluation study conducted by lenders suggested that an attempt to restructure the debt would not prove to be a long-term solution. Given those findings and lack of interest from external bidders at a price acceptable to lenders, an attempt at resolution under the Insolvency and Bankruptcy Code may not yield much, the bankers said.
As such, approaching the debt recovery tribunal may be an option, said one of the two bankers cited earlier.
State Bank of India, the largest lender to Suzlon, has already fully provided against its nearly Rs 3,000 crore loan exposure to Suzlon, the banker quoted earlier said. Other banks in the 19 lender consortium are in the process of providing fully against the account as well.
According to this banker, the lending consortium believes that while the company is currently highly leveraged, individual assets owned by Suzlon carry value. Bidders could be interested in the 15GW of wind power assets, the operation and management business of the company, which provides technical assistance for its wind turbine assets, and the vast pockets of land on which wind farms are set up.
Along with approaching the DRT, liquidation via the IBC is also an option, the bankers said.
According to Section 33 of the IBC, if a resolution professional notifies the NCLT about a committee of creditors’ decision to initiate liquidation proceedings against a borrower any time before the confirmation of a resolution plan, where the decision is supported by a 66 percent majority vote, the borrower’s company can be put under liquidation.
Queries mailed to SBI, SBI Capital Markets and Suzlon on Friday were not answered.
Suzlon has been a long-standing point of stress for Indian lenders.
After one round of debt restructuring in 2013, the company had proposed a second restructuring. However, lenders decided to avoid this route and decided to negotiate with external investors, BloombergQuint had reported in June. SBI Capital Markets was appointed to look for potential buyers.
In June, Canada-based Brookfield Asset Management had shown interest in taking over majority equity stake in Suzlon. However, the private equity firm withdrew from the process after lenders were not keen on taking a 60-70 percent haircut on their debt exposure, the two bankers quoted above said.
Suzlon had later made another offer to repay $1.2 billion in a one-time settlement proposal backed by Denmark-based Vestas Wind Systems. That plan was also withdrawn, after Vestas pulled out of the deal in September, Bloomberg had reported.
Meanwhile, the company continues to report weak financial performance. In the July-September quarter, Suzlon reported a Rs 778-crore loss, more than the Rs 627-crore net loss reported a year ago.
Tulsi Tanti, the promoter of Suzlon and his family own about 19.82 percent stake in the company. Sun Pharmaceuticals Ltd. promoter Dilip Shanghvi cumulatively owns about 18.8 percent stake in Suzlon. Banks and financial institutions control 3.57 percent stake, while Life Insurance Corporation of India owns 1.69 percent.
Suzlon issued a statement to the stock exchanges in response to this story. In that the company said it is working on a resolution plan and lenders have time till January next year to work on a sustainable resolution plan before taking any extreme steps.
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