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Debt-laden Suzlon Energy Ltd expects an upgrade from credit rating companies after it announced a restructuring of its foreign currency convertible bonds (FCCBs) worth $485 million on Saturday. The Pune-based company, the world’s fifth-largest wind turbine maker, also expects to conclude a sale of non-core assets worth INR 1,000 crore in the current financial year to repay debt. Suzlon’s debt is being tagged with default status by rating companies for the last 18 months, Kirti Vagadia, group head, corporate finance, at Suzlon Group, said in a telephone interview on Sunday.

“Now, we expect credit rating agencies will assign us normal rating after the restructuring of bonds,” Vagadia said. “Globally, these credit ratings play an important role for companies.”

On Saturday, after nearly two years of negotiations with bondholders across the US, Europe and Asia, Suzlon has reached an agreement with investors to restructure its four different series of FCCBs worth $485 million for five years.

This is one of the largest bond restructuring deals in the country. Suzlon failed to repay $209 million of debt on 11 October 2012 after bondholders rejected its request for a four-month extension. The default was the biggest on convertible bonds by an Indian firm. As a part of the restructuring, Suzlon will issue approximately $485 million and the new restructured bonds will have a maturity period of five years and one day from the date of issue. These bonds will mature in 2019-20 fiscal year, the company said.

The conversion price is set at INR 15.46 a share, being 10 Percent over the regulatory floor price. Suzlon Energy has four series of FCCBs of $200 million that was due in October 2012, $20.8 million due in October 2012, $90 million due in July 2014 and $175 million due April 2016.

“Now we don’t see any major risk coming in. We have time till 15 August to secure necessary approvals from regulators. We will be meeting bondholders on 9 July,” Vagadia said without disclosing details of interest offered and break-ups between the bonds. The company has offered around 6 Percent interest rate on the restructured bonds against the current 5 Percent, a person close to the development said requesting anonymity.

Suzlon has also entered into a so-called standstill pact with the bondholder’s ad-hoc committee to facilitate the proposed restructuring of the existing bonds. This pact provides for a standstill period extending to 15 August.

On Friday, Suzlon Energy’s shares rose 2.14 Percent to INR 13.38 , while the to 22,403.89 points. Since 11.10.2012, Suzlon shares have fallen 17.41 Percent.

“Suzlon has seen it all. From a high profile company, it had gone near to bankruptcy. The company had managed to issue bonds worth $647 million last year despite defaulted FCCBs,” said a consultant, requesting anonymity. “Certainly, it is good news for the company, as there is no cash going out. Bondholders have no option. But once the credit rating improves, bondholders may have a better scope in the future.”

The proposal, including the terms of the new restructured bonds, should get the nod from the Reserve Bank of India, the CDR (corporate debt restructuring) group of banks and the requisite majority of the holders of the existing bonds in each series. “In this regard, the company will issue separate notices, each dated on or about 6 May 2014 to convene meetings of the holders of each series of the existing bonds to consider, and if thought fit, to approve, the restructuring proposal,” the company said on Saturday.

Vagadia said the proposed cashless restructuring package for the existing bonds is the best solution to the last remaining piece under the comprehensive liability management programme and is value accretive for all stakeholders. “It was a complex process but bondholders never raised an issue,” he said. “They were solution-oriented.”

Suzlon, which is going through a INR 9,500 crore CDR exercise, reported a loss of INR 1,075.25 crore for Q4, compared with a loss of INR 1,154.53 crore in the year-ago period. In January 2013, Suzlon’s lenders, a consortium of 19 banks, agreed to enhance working capital facilities to the group by INR 1,800 crore and announced a 10-year deferred repayment plan. The consolidated debt of Suzlon Group stood at INR 14,971.29 crore on 30 September, as per the latest data, Mint research reveals.

Vagadia said the CDR was for 10 years and the company still has 8.5 years for major repayments. “The two-year moratorium under CDR gets over on 30.09.2014. But these are small instalments and we should be able to fund from our operations,” he said. The company recently sold its stake in a factory in China and wind park in the US.

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