* Suzlon sought to extend maturity of over $200 mln bonds by
* Two tranches of overseas convertible bonds due on Thursday
* Shares fall as much as 5 percent after bondholders reject
(Adds share price, background on convertible bonds)
By Tony Munroe and Sumeet Chatterjee
MUMBAI, Oct 11 (Reuters) - India's Suzlon Energy Ltd
was poised to default on redemption of more than $200
million in overseas convertible bonds due on Thursday after
bondholders rejected a four-month extension, sending its shares
down as much as 5 percent.
The world's fifth-largest maker of wind turbines was one of
many Indian companies that rushed to tap the convertible bonds
market before the global financial crisis, mostly to finance
Since then, many of the nearly two dozen companies that had
nearly $6 billion in foreign currency convertible bonds maturing
this year have been struggling to meet their debt obligations
due to a sharp plunge in share value, feeble earnings growth and
a weaker rupee.
A total of $1.3 billion of convertible bonds are expected to
come up for redemption in the October-December quarter, local
brokerage Kotak Securities said in a report last month.
Suzlon is set to become the first prominent victim of the
costly debt, after companies like Subex Ltd struggled
to raise funds to redeem the bonds as their shares slumped well
below the trigger level for converting the bonds to equity.
"I regret to announce today that the bondholders' meetings
did not achieve the consensus we were hoping for and the
four-month extension sought by us has not been granted," Kirti
Vagadia, chief financial officer of Suzlon, said in a statement.
"We expect that an acceptable solution for all stakeholders
will be arrived at the earliest possible," Vagadia said.
Suzlon has been under pressure for the last few years from a
slowdown in global turbine sales and its debt pile. It posted a
net loss in the April-June quarter compared with a profit in the
At the group level, Suzlon had net debt of 130.17 billion
rupees ($2.45 billion) at the end of June, rising from 105.44
billion rupees in the year ago period, while its cash totalled
13.72 billion rupees at end-June.
Suzlon said last month it would seek approval from
bondholders on Oct. 10 to extend the maturity of two the
tranches of convertible bonds due on Oct. 11 by four months to
Feb. 11 to give it time to raise funds to repay bondholders.
Suzlon raised $200 million through dollar convertible bonds
in 2007, and the amount outstanding on this tranche was $121.4
million with a conversion price of 97.26 rupees per share,
according to Thomson Reuters data.
The second tranche of convertible bonds worth $20.8 million
and issued in 2009 had a conversion price of 76.68 rupees.
Shares in Suzlon dropped 5.1 percent on Thursday to 15.70
rupees, while the main Mumbai market index was trading
0.2 percent lower.
The stock has plunged about 83 percent in the last three
years, wiping off $2.5 billion from its market value.
Fitch Ratings predicted in a report in February that about
half of the 55 companies with maturing foreign currency
convertible bonds in 2012 were at risk of some type of
restructuring or default.
The combination of higher domestic borrowing costs and risk
aversion among global banks has made it tougher for the smaller
and mid-sized Indian companies to raise funds to pay
While Subex, which provides technology services to telecoms
companies, and Educomp Solutions Ltd struggled to meet
their debt obligations this year, concerns remain about the
ability of some other companies, analysts say.
Loss-making GTL Infrastructure Ltd has set up a
committee to restructure its convertible bonds worth about $228
million due in November. Its stock has fallen 80 percent since
2011 amid concerns about its debt obligations.
In July, Suzlon redeemed $360 million of overseas
convertible bonds after bondholders agreed to a 45-day deadline
extension, allowing the company to raise bank loans for the
Investors heaved a sigh of relief after debt-laden Reliance
Communications Ltd, India's No.2 mobile operator,
managed to raise $1.2 billion from Chinese banks in January to
redeem its convertible bonds.
($1=53.1350 Indian rupees)
(Editing by Ryan Woo)