The loan sale was concluded even as the wind energy company was in the midst of its second bank-led restructuring initiated in 2020. The REC and IREDA-led refinance would extend the tenure of Suzlon’s loans and would also bear a lower interest rate than what it was paying banks, multiple people familiar with the contours of the deal said.
“It is a win-win for both banks and the company. Banks are getting rid of a troubled account which is showing no signs of recovery.
gets a better repayment schedule and a cheaper rate of interest which makes the company’s financial position more sustainable,” said a person aware of the deal.
According to the restructuring initiated by banks in 2020, Suzlon’s gross debt of ₹11,000 crore was sliced into sustainable (₹4,000 crore), unsustainable (₹3,000 crore) and some of it was converted into equity shares (₹4,000 crore).
“According to the restructuring plan the company had time till 2028 to pay off its dues at an average interest rate of 11%. Now the new refinancing envisages time till 2030 and an initial interest rate of 9.5% which is a very good deal for Suzlon. Moreover now with the repayment of dues, the non-performing asset (NPA) tag that banks had put on the company is off and some banks can afford to write back provisions this quarter,” said a second person aware of the transaction.
In a notice to the stock exchanges on May 25, Suzlon had said that the specialised power sector knowledge of REC and IREDA would put them in a better place to address the specific needs of the group and allow adequate operational flexibility for the efficient running of the business.
“We have completed our debt refinancing activity, replacing our 16 lenders with two new lenders who come with specialised domain knowledge of the power sector. This move will support our future growth plans,” the company said in response to ET’s queries.
REC and IREDA did not reply to an email seeking comment.
As per the agreement, banks will continue to hold an equity stake in the company with the conversion of optionally convertible debentures (OCD) and compulsorily convertible preference shares (CCPS). Banks also do not need to maintain a lock-in for the stake held by them and are free to sell it in the open market as desired.
SBI is the largest banker with ₹2,900 crore of dues outstanding, followed by BoB with ₹1,550 crore and
with ₹1,500 crore in a consortium of 16 banks.
“The fact is that any recovery from this account looked doubtful. Infusion of equity from promoters was also taking time. Banks have taken the best decision on the basis of available information. If we are lucky we may get some upside on the shares we hold. For now, it’s over to REC,” said a third person aware of the transaction.