The nation is under a 21-day lockdown. Bankers are conducting most of their business over video conference rather than negotiating across the table.
It was over one such video call that more than a dozen lenders to Suzlon Energy Ltd. signed-off on a second restructuring plan for the debt-ridden wind power company, said two bankers familiar with the matter, while speaking on condition of anonymity.
The plan involves Rs 7,700 crore in loans to Suzlon being converted to convertible debentures to be repaid over the next ten years, one of the two bankers said. About Rs 3,600 crore worth of dues would be classified as sustainable debt and would follow the normal repayment schedule.
This would mean that about 68 percent of Suzlon’s Rs 11,300 crore outstanding debt would be treated as a haircut for the lenders involved for now.
Lenders have also asked the company’s promoter Tulsi Tanti to infuse equity worth Rs 375 crore to ensure that the company can continue as a going concern. As part of the restructuring plan, Suzlon had also sought about Rs 1,000 crore worth non-funded exposure. The lending consortium did not accept this request and asked the company to seek this facility from other lenders in the market.
On Monday, Suzlon informed stock exchanges that 100 percent of lenders had approved a restructuring plan. It did not provide details. An email sent to Suzlon and to lead banker State Bank of India on Tuesday was not answered.
The process of approving a new restructuring plan for Suzlon has been underway for some time.
In February, BloombergQuint reported that SBI had approved a restructuring plan for Suzlon. One of the bankers quoted above, a top SBI official who was directly overseeing the matter, said that the process of getting approvals from all the lenders in the consortium started immediately.
Through most of February, SBI’s senior officials as well as advisors from SBI Capital Markets responded to queries from other lenders and their internal legal teams. This was a long drawn process since each lender needed board approval.
The deadline for final approvals was March 31, which is when the 180-day period permitted under RBI’s June 2019 restructuring circular ended. If a decision was not arrived at by the deadline, banks would have to set aside higher provisions against the account.
The top SBI official quoted above said that some lenders wanted shareholder approval for the issuing of debentures. This is not strictly necessary but lenders were keen to tick all the boxes.
On February 27, Suzlon announced that an extraordinary general meeting would be held on March 24 in Ahmedabad. Restriction imposed due to the spread of coronavirus forced the company to delay the EGM to April 15, the SBI official said.
Lenders eventually decided to sign off on the plan even before the EGM.
Suzlon’s resolution process has been in the works for nearly a year. While two bidders including Brookfield Asset Management and Vestas Wind Systems had shown initial interest in the company, they backed out last year. Following this, lender started working on restructuring plans. However, the options were limited since the company had already gone through a round of debt restructuring in 2013.
SBI briefly considered initiating recovery proceedings against the company. However, that plan was put on hold, in favour of a resolution plan suggested by the wind power producer.
The company’s finances, meanwhile, have deteriorated. Suzlon reported a net loss of Rs 705 crore in the October-December 2019 quarter, as compared with a loss of Rs 64 crore a year ago. Total income from operations dropped to Rs 673 crore in the third quarter, as compared with Rs 1,112 crore last year.
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