CORPORATE DEBT RESTRUCTURING (CDR)

The INR has depreciated 36% in the last 5 years and the 44% of the FCCBs for SEL are still unhedged for forex risks. Thus we can safely assume that the Mark-To-Market (MTM) loses for Suzlon will be considerable going further. The possible solution would be to restructure/refinance FCCBs through domestic debt (exhibit 18). Refinancing through domestic debt will result in high interest expenses Suzlon decreasing its PAT by a significant amount. Restructuring will lead to a higher dilution of promoters stake which currently stands at 44.16%. Suzlon can make the repayment through following alternatives: 1. Existing cash and cash equivalents or operating cash flows 2. Refinancing of debt 3. Additional dilution On the basis of current Debt to Equity position, net cash outflows and committed capital expenditure refinancing option will reduce profitability by ~8.3% . Moreover since the D/E ratio of the firm is more than 1.5X (1.8X as on FY2011), Suzlon would find it difficult to raise further debt. Therefore, with negative cash flows, the only alternative that Suzlon should opt is dilution of promoters stake. Current Debt: 11,000 crore with nine CDR and four non CDR lenders. Suggested Action Plan Expected cash inflows from Edison, U.S customer: Rs 1,100 crore Savings from reduced fixed expenditure: Rs 300 crore Proceeds from sale of non-core asset by FY2015: Rs 2,800 crore Proceeds from sale of assets from Tianjin, China plant by FY2014: Rs 280 crore Proceeds from sale of SE Forge, SE Electricals etc. in FY2013: Rs 160 crore Proceeds from sale of Promoters stake: Rs 240 crore (Saikat, 2012)

In order to achieve a sustainable capital structure the company should enhance its working capital capacity by obtaining credit of INR 1500 crore from banks for working capital facilities, a reduction of interest rates, and conversion of interest costs into equity (Moneycontrol Bureau, 2013).

Debt Repayment schedule

Debt repayment schedule Current outstanding FY13E 654 389 465 860 1,979 65 86 540 (USD mn) FY16E 175 559 734

FCCBs Acquisition loan Term loan Total

FY14E 200 86 286

FY15E 90 200 129 419

FCCB Out standings as on May '2012

FCCB Out standings as on May '2012 Company Name SUZLON SUZLON SUZLON SUZLON SUZLON SUZLON Maturity period Jun-12 Oct-12 Jun-14 Oct-14 Jun-16 Oct-16 Issues Currency USD USD USD USD USD USD Issue size 300 200 90 20.8 35.6 175 O/S as on Fixed Exchange (USD mn) Rate 211.3 121.4 90 20.8 35.2 175 44.6 44.6 48.2 49.8 49.8 44.6 Redeemable amount ( bn) 17 9.7 6.7 1.8 2.9 10.5

FCCB Restructuring FCCB Restructuring Bond series I Particulars New bond issued (3:5) Buy back (54.6%) Option not excercised Total Cash paid on buy back Consent fee paid Gain

Bond series II

Original Restructured Original Restructured 59.3 35.6 34.7 20.8 29.4 44 211.3 211.3 121.4 121.4 300 246.9 200 142.2 16 24 11.8 1.9 25.3 31.9

FCCB redemption
FCCB Redemption Company Name SUZLON SUZLON SUZLON SUZLON Maturity period Oct-14 Oct-14 Oct-14 Apr-16 O/S as on (USD mn) 90 20.8 35.2 175 Redeemable amount ( bn) 6.7 1.8 2.9 10.5 Cumulative MTM loss ( bn) 0.9 0.2 0.3 2 Effective borrowing cost (%) 9 11.8 10.8 11.1 Current preveilng yield(%) 31 53 92 24

Likely dilution required

Likely dilution impact on FCCB restructuring Equity dilution on conversion of FCCB @ CMP(%) Promoter holding (%) Likely As at Post conversion of redeemable Total Additional Q4FY1 FCCB @ CMP

Company

amount SUZLON 48.6 49.5 31.9

2 52.8 26.6

Assumptions: 1. MTM calculated at exchange rate of 55.26INR/USD 2. FCCB converted till FY 2012 FCCB likely to convert for 20% CAGR is treated as equity and the balance as debt