To use $1 b pay-off to clear debt

In a bid to pay off its debt, wind turbine maker Suzlon Energy is amalgamating its wind and services business with its cash-rich German subsidiary REpower. This may fetch Suzlon over $1 billion, with which it could pay off its rupee debt (of ₹5,300 crore) and come out of the ‘corporate debt restructuring’ – a bankers’ scheme that helps defaulting companies recast their loans.

In a parallel move, REpower is also likely to come up with a public issue in Europe. Suzlon might dilute 25-35 per cent of its holdings in REpower, subject to regulations prevalent in Europe, sources in the banking industry told Business Line. Suzlon, on its part, declined to comment.

Suzlon has debt of ₹14,150 crore on its books, of which ₹9,500 crore is being restructured under the CDR programme. REpower is cash-rich, but its parent Suzlon is unable to make use of the German subsidiary’s reserves to pay off its debt because German banks do not allow it. REpower is one of the larger players in the European wind industry. Last December, it said it had picked up orders for 266 MW in Germany. The idea ,therefore, is to let REpower acquire the Indian parent’s performing assets, and unlock its value.

The move to sell the two businesses to REpower adds to the list of attempts made by the company to raise cash to pay off debt. In September last year, it divested 75 per cent stake in its China subsidiary to raise $28 million.

(This article was published on February 4, 2014)
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