Wind power company Suzlon Group's board has approved a cashless restructuring of its foreign currency convertible bonds (FCCBs). The size of the issue is about USD 485 million subject to necessary approvals, the company said in a statement issued on Saturday.
Speaking to CNBC-TV18, Kirti Vagadia, group head (corporate finance) at Suzlon said the interest rate of FCCBs will be closer to 5 percent. "The total interest burden on annual basis is at Rs 1,300-1,400 crore right now," he said. He expects to receive regulatory approvals by mid-June. The group said the new bonds are due 5 years and 1 day from the date of issue, to mature in financial year 2019-20.
Also Read: Suzlon Energy to sell Rs 1000cr of non-core local assets
Suzlon CDR debt currently stands at around Rs 9000 crore, while its FX debt (including FCCBs) currently stands at around USD 1 billion. There will be another board meeting on July 9. The company is looking to sell Rs 1,000 crore of non-core assets in FY15 to cut debt. "We will try to achieve quarterly breakeven in FY15," Vagadia said.
The company may also explore the option of listing REpower, which remains one of its strongest assets, Vagadia said.
Below is the transcript of Vagadia's interview to CNBC-TV18's Latha Venkatesh, Pragya Bhardwaj and Sonia Shenoy.
Latha: Can you take us through the terms of the restructuring? We have not got the interest rate on the new bonds?
A: I have already mentioned in my release that the interest rate would be according to Reserve Bank of India (RBI) ceiling and it is around 5 percent. Initially, for first 18 months, it is lower rate and then it is stepping up. Overall basis, it is closer to 5 percent, which is RBI's ceiling on the annual credit plan (ACP).
Latha: What are the other terms of the bond; it is a USD 458 million FCCB issue?
A: Yes. It takes care of my all four outstanding series of foreign currency convertible bonds (FCCBs) and the principle amount is around USD 484 million. It is about 10 percent premium on SEBI floor price of shares and it is a five year bond. So maturity would be roughly in July 2019.
Sonia: When do you expect to get the necessary approvals from the regulators on this particular FCCB?
A: Regulatory approval is something, which is always in the hands of regulator. But we have budgeted certain period. We expect all regulatory approvals by middle of June. We will be having a bondholder's formal meeting on July 9.
Latha: What is your current outflow of interest for FY15, counting both the foreign outflows, the dollar outflows as well as the rupee outflows?
A: As you are aware that some of our interest, which is on term loan is getting converted into equity, so it is not a cash outflow. So if you take total interest burden on the company on an annual basis it is roughly about Rs 1300-1400 crore. But if you take cash outflow on interest it is less than Rs 500 crore.
Sonia: So how much of your non-core assets you would be able to sell in this financial year in order to repay your debt?
A: We have sold our China asset as well as our US asset, which is Edison Mission. We are further targeting to sell roughly about Rs 1000 crore from non-core asset. This Rs 1000 crore will be sold within FY15 itself that is our target.
Latha: So what is the debt now and what will it come down to, what is the timetable you are looking at?
A: If you take the corporate debt restructuring (CDR) it is roughly about Rs 9000 crore and over and above that is foreign currency debt of roughly about a billion dollars.
Sonia: When do you think Suzlon could manage to breakeven with this bond agreement also in place do you think there could be a breakeven within FY15 or do you think it would be in FY16?
A: First let me brief you that this is a difficult period which I believe is over for us. Market is moving towards a growth phase so we have well within time restructured our organization. Now we are looking at about global and domestic market growth growing at a 40 percent rate as compared to last financial year. And you might be aware that despite all difficult period Suzlon has been able to maintain its global position at number five in this year as well. With all the stake holders supporting particularly our lenders, customers, suppliers, we are in a position to quickly go back to a volume growth. I don't want to give any target, but definitely in this particular financial year, we will try to achieve a quarterly breakeven as quickly as possible.
Pragya: So currently the FCCBs, which are outstanding on the company, is only USD 485 million, which the company has been able to restructure?
A: That is correct.
Pragya: The other question is with regards to the listing of REpower. The company has made a lot of comments on that. There is a lot of market speculation. Could you give us a roadmap as to what is the company targeting on that front? Will we see something in this financial year given that REpower's order inflows etc, has been fairly strong in the current global conditions or we will have to wait for some announcements on that?
A: First let me say that REpower is one of the strongest assets in the wind energy. It has been generating significant growth and profit even in the worst financial years of wind industry. As compared to peer group it has maintained its profitability in last three years which was not good for wind industry.
So it is a very strong asset and as you are aware that financial market is very favourable for wind energy particularly debt and equity is now available very easily for wind energy market, wind energy companies. Valuation which was previously around multiple of EBITDA at four times has gone closer to 9-10 in the global market. So definitely the valuation of our company has also improved significantly.
Senvion is the new name of REpower. I would not say that we will opt only for a listing as an option but definitely this is one of the options, which we may explore at a suitable time because we need to rebalance our capital structure.
Latha: Is that suitable time the current financial year?
A: I cannot comment on the timing of this. It is a function of many factors. However, this is one of our options, which we may explore at a suitable time.
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