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Monday, May 10, 2010

Suzlon's FCCB holders waives fine...Sets conversion price of Rs.95-100/sh.

Suzlon Energy had sought for the waiver of penalties that have accrued for breaching terms and conditions set by investors in its Foreign Currency Convertible Bonds. The penalties was amounted to 10 per cent of FCCBs, or $30-50 million. Suzlon told the exchanges that it has managed to remove covenants which was required to fulfil under the FCCB agreement in the meeting of bondholders,on April 29, 2010. The company proposed extraordinary resolutions in relation to the trust deeds and certain terms and conditions of the bonds, including the removal of financial covenants and waiver of any existing or prior breaches.

It has been learned that these two sets of FCCBs worth $300 million Zero Coupon Convertible Bonds(due JUNE 2012) and $200 million Zero Coupon Convertible Bonds(due OCT 2012), have three main financial covenants. First, Net borrowings to tangible Networth cannot be more than 1.5 times. Second, full-year EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) cannot be less than 1.33 times the debt service coverage requirement, ie, repayment and service cost. Third, Net Borrowings to Net EBITDA should not be more than four times.

Just to remind that the profit of the company has been under pressure for the last three quarters and hence, it has not been able to meet the Net borrowings to Net EBITDA margin,” this was a concern for FCCB holders as this invited penalty from bondholders. It has been learnt that, the company is not expecting an increase in EBITDA in coming quarters. EBITDA will continue to fall for the coming quarters. Suzlon reported an Ebitda of Rs 408 crore in the 9 months to December 31, down from Rs 1,996 crore a year earlier.

Suzlon has reset the conversion price of bonds between Rs 95-100 per share.Suzlon will become the first company to reset the conversion price of FCCBs after the ministry of finance relaxed the guidelines for companies to price their bonds based on share prices of the past six months. Suzlon will pay 1% fees to bondholders for the waiver. Earlier conversion price was Rs.360-370 per share.The covenants have been relaxed for the entire tenure. This new price is likely to result in a dilution of 15.05% for the company. UPDATE- (Set the price Rs.97.26/sh)

Since, Suzlon has already sold its 23,60,00,000(35.22%) depository interest in Hansen Transmissions International NV - HSN:LN held by AE Rotor Holding BV a wholly owned indirect subsidiary of Suzlon Energy Ltd at the price of 95 pence per Depository Interest amounting to USD 350 million, with a locking period for 6 months for the remining stake of 17,46,32,079(26.06%), Which is about to complete by this MAY 2010,this will pegg Suzlon some what around Rs.1000 crs,this will substantially help Suzlon to reduce its current debts of Rs.10,488 crs.

It is awaiting approval from the Reserve Bank of India for the FCCB restructuring.

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