Suzlon completes FCCB restructuring issues 53 cr shares at Rs 6.77 per share
July 2019 would mark as a black day in the history of the existence of Suzlon, Suzlon had to face the ignominy of being India’s largest FCCB defaulter.
A year later we can see a smile on Tulsi Tanti’s face and the overall mood at Head Quarter upbeat, the WindMan of India has once again managed to wriggle out of the debt trap he got himself into a decade back.
The FCCB saga dates back to more than a decade and is a fallout of the ambitious growth strategy of Suzlon. In 2007, Suzlon went for the most ambitious business move for any Indian company, the acquisition of REpower of Germany, one of the top wind power companies in the world.
It issued zero-coupon and coupon-bearing foreign currency (US dollar) convertible bonds (FCCB) amounting to $760 million to finance the acquisition. These bonds were listed in Singapore. Due to deteriorating business conditions the company experienced a sharp decline in profitability and stock price resulting in a debt overhang. At the same time, the Indian rupee depreciated from INR44 to INR55 leading to losses on largely unhedged, foreign currency coupon payments. The company had to restructure its capital structure to escape bankruptcy.
Since FCCB holders did not agree to restructure the terms of the instrument, the company had to turn to senior lenders to restructure debt. Eventually, Suzlon had to sell-off REpower to reduce leverage.
Today marks a new chapter in the FCCB saga that nearly killed the company, Suzlon bondholders have signed off on a landmark resolution and restructured the bonds with part conversion into equity.
The board of Suzlon approved allotment of 51 crores equity shares each of the Company on the conversion of 57,554 USD 546,916,000 Step-up Convertible Bonds due July 2019 converted to equity at INR 6.77 per share and the remaining converted to 112000 bonds having the face value of USD 320 from earlier USD 1000.
The restructuring reduces the FCCB from a whooping USD 187 Million to USD 36 Million to officially mark the end of one of the most successful debt restructuring in the history of India Inc.