Troubled wind energy firm Suzlon Energy has decided to seek shareholder approval through postal ballot for allotment of equity to lenders under the corporate debt restructuring (CDR) scheme, increase in share capital of the company and sale of undertakings to reduce the debt burden.
The board of directors of Suzlon Group on Friday approved various decisions pertaining to equity issuance under the CDR scheme. With this, lenders having an exposure of Rs. 9500 crore will convert part of their debt into equity—a similar exercise was carried out by Kingfisher Airlines three years ago to cut down its debt.
“While this is an important step for the company to complete the various aspects of the CDR scheme, it is also a key step towards improving the financial health of the company,” said Kirti Vagadia, CFO, Suzlon Group.
“We anticipate that with these steps we will, by mid-April 2013, improve our leverage position in terms of our debt-to-equity ratio. We believe that by our lenders taking an equity position, in addition to providing critical financial support, is an important signal of their confidence in our fundamental viability as a business, and our long-term outlook,” Mr Vagadia added.
“Along with the other enabling resolutions around the acquisition of outstanding shares in a subsidiary and approval for sale of undertakings, these steps will help us realise greater efficiencies and continue to normalize our business," Mr Vagadia said.
Conversion price
The conversion price for share issuance to lenders will be at the price of Rs. 18.51 per share, determined as per SEBI's preferential pricing guidelines assuming 31st December, 2012—the CDR approval date— as the relevant date. With these steps, and the approval for increase in the authorized share capital of the company, the total share base is projected to increase from Rs. 177 crore to Rs. 219 crore by April, 2013, and Rs. 291 crore by September, 2014.
Shares of Suzlon Energy closed with a loss of 1.17 per cent at Rs. 16.85 on the Bombay Stock Exchange.
