Lenders to Suzlon demand to raise equity of Rs 5,000 crore or sell REpower

Lenders to Suzlon EnergyBSE -5.15 % are demanding that the
company raise equity of 5,000 crore or sell its 'crown jewel' REpower
before any loan restructuring

as wary banks do not want a repeat of the Kingfisher fiasco.

The lenders will agree to lower interest rates and extend the tenure
of the loans to ease pressure on the company's finances only if the
wind power equipment maker

sheds some assets, two people familiar with the development said.
Suzlon owes lenders 14,000 crore.

Founded by Tulsi Tanti, Suzlon says it won't sell a stake in REpower
that it took control of after a bitter battle with Portugal's Martifer
before the 2008 credit

crisis and by paying over the odds. "The company is in negotiations
with its lenders on the CDR issue," the Suzlon spokesman said in an
email response. "We have also

been on record in recent weeks stating, without ambiguity, that
REpower is 'the jewel in our crown' and it is by definition a critical
asset and, therefore, not for

sale. Our position has not changed."

Faced with rising bad loans and a deluge of restructurings estimated
at 3.25 lakh crore, banks are turning cautious in providing liberal
terms to borrowers.

The banks' cautious attitude follows restructuring of debt to
companies such as Kingfisher AirlinesBSE -3.18 % and telecom tower
firm GTL, which has left them weaker.

The wind power equipment maker landed in financial trouble when its
acquisitions during the pre-crisis period led to accumulation of more
than .`14,000 crore of debt.

Other than REpower, Suzlon had bought Belgian gear-box maker Hansen,
which it later sold off to reduce debt. Suzlon has now sought
restructuring of the loan terms.

Corporate Debt Restructuring (CDR) refers to the forum for lenders to
ease loan terms for companies in financial trouble. A loan is eligible
for CDR provided the

initiative to resolve the case under the CDR system is taken by at
least 75% of the creditors by value, and 60% by number.

The proposed recast package for Suzlon stipulates that the borrower
invest Rs 250 crore immediately, and Rs500 crore more over 18 months.
Lenders have agreed to lower

the interest rate to 11%, from 14-15%. If the restructuring happens,
banks would reinstate the working capital limit of Rs 1,500 crore,
which was blocked earlier.

In turn, Suzlon would be required to consolidate by selling some of
its overseas subsidiaries and open an escrow account with the lead
bank, State Bank of India.

Suzlon has appointed SBI Capital Market, the bank's investment banking
unit, to advise it on debt recast. Officials, who declined to be
named, said the lenders have in

principal approved the debt recast package but the management of each
bank will have to give written consent.

Suzlon Energy has been reporting losses since 2009, after the
acquisition of REpower. It logged a loss of Rs505 crore last fiscal.
Suzlon Energy has domestic loans of

Rs 10,000 crore and overseas loans of Rs 3,500 crore. State Bank of
IndiaBSE -1.90 % has the highest exposure atRs 3,400 crore, followed
by IDBI atRs 2,200 crore. PNB

has lent Rs 800 crore while LIC has provided Rs 550 crore.

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