Suzlon plans to buy-back or restructure $ 500 million FCCB

Suzlon plans to buy-back or restructure $ 500 million FCCB; gives three options to bondholders; mixed reaction from brokerage houses

Suzlon plans to buy-back or restructure $ 500 million FCCB.

3 Options to bondholders:

1) Issue new bonds in place of old bonds: upto $ 147 million new bonds in lieu of the old bonds worth $ 245 million, conversion price reduces from Rs 360-370 to Rs 75/sh, YTM on new bonds is 20%.2) Buy back of existing bonds at 45% discount: $ 73 million FCCB for $ 40 million (limited to only 15% of total bonds).

3) Retain the same bonds with change in terms and conditions: to pay upto $ 15 million as incentive fee in respect of existing bonds having a face value of $ 150 million.

Research firm CLSA says that the FCCB restructuring will reduce debt by $ 131 million (5% of debt) & risk of immediate redemption will go away. The company has to manage payments of Euro 205 million to Martifer in next 40-45 days. It requires 75% of the bond holders to approve the scheme. It maintains underperform with a target price of Rs 50.

Bank of America is bullish on Suzlon. The net addition to net worth will be Rs 530 crore. An improvement in net debt/ equity ratio by 8%. EPS dilution by 3% on 7.5% per annum interest payable on $ 147 million convertible bonds. It maintains price target at Rs 92/share.

Citi maintains target price at Rs 42/share. It addresses short term funding constraints & $ 500 million of FCCBs due in FY13E.

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