BQ Exclusive: SBI Approves Suzlon’s Debt Restructuring Plan

State Bank of India has agreed to proceed with a restructuring proposal by wind power firm Suzlon Energy Ltd., a senior banker familiar with the matter told BloombergQuint on the condition of anonymity. The decision was taken by the bank's board after a series of meetings last week.

Suzlon, which owes banks Rs 11,300 crore, had proposed to split its debt into a sustainable and an unsustainable part. The company sought to convert Rs 7,700 crore in debt into convertible debentures, which would be held in the investment books of banks. Debt worth about Rs 3,600 crore was seen as sustainable and would remain in the form of loans. An additional Rs 1,000 crore in non-fund exposure, via facilities such as letters of credit etc., will also continue, the company had proposed.

According to the banker quoted above, SBI has accepted a haircut of about 68 percent on the debt. Banks may also convert a small portion of the debt into equity, giving lenders minority shareholding in the company, this banker said. This would allow lenders to benefit from the upside in the company's stock price once operations stabilise, the banker quoted above said.

A spokesperson for Suzlon declined to comment.

SBI's approval for the proposed restructuring is the first step. The plan will now be circulated among the other lenders in the consortium and an approval will be sought from each. Under the inter-creditor agreement process, a resolution plan must receive approvals from at least 66 percent of the lenders in the consortium. Once it has received majority approval, a plan is binding on all lenders.

Lenders have been mulling a restructuring plan for the wind energy company, after it failed to attract investors. Suzlon was in talks with Brookfield Asset Management and Vestas Wind Systems for a potential investment. However, both investors backed out last year.

The options in front of lenders were limited. They could either approve the restructuring plan or refer the company for insolvency proceedings. According to the banker quoted above, insolvency proceedings are not a good option given the relatively low interest in assets related to the power sector.

Should all lenders approve the restructuring plan, this would be the second time that Suzlon has restructured debt since 2013. At the time, it had used the corporate debt restructuring cell.

The company's operations, however, deteriorated again.

The wind power company 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.