Suzlon to Sell German Unit to Centerbridge for $1.2 Billion

By George Smith Alexander and Abhishek Shanker

Suzlon Energy Ltd. (SUEL), which suffered India’s biggest convertible-bond default in 2012, agreed to sell its German unit to funds managed by Centerbridge Partners, L.P. for 1 billion euros ($1.2 billion) in cash as it reorganizes debt.
Proceeds from the sale of Hamburg-based Senvion SE will be used to pare borrowings, and Suzlon will focus on home and high-growth markets, Asia’s second-biggest wind-turbine maker said in a statement. The deal is expected to be completed before the end of March.
Suzlon Chairman Tulsi Tanti told analysts Nov. 3 that he’s “very serious” about reducing borrowings and freeing up more capital for projects. The company, whose liabilities surged 30 percent within three years to 173 billion rupees ($2.8 billion) by September, is seeking to emerge from a debt revamp program by the end of March.
As much as 60 billion rupees from the sale proceeds will be used to repay part of its 165 billion rupees of debt, Tanti told reporters in a conference call from Davos, where
he is attending the World Economic Forum. The balance amount will be used for working capital needs, he said.
Shares of Suzlon reversed initial gains to fall 7 percent to 16 rupees at the close in Mumbai. The stock has risen 8.8 percent this year, compared with a 5.5 percent gain in the benchmark S&P BSE Sensitive index.

Photographer: Dhiraj Singh/Bloomberg

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“We don’t see the company as a great investment because of its financial troubles,” said Paras Bothra, vice president of equity research at Ashika Stock Broking Ltd. in Mumbai. The sale “will be marginally positive for the bottomline.”

Additional Payment

Suzlon could receive as much as 50 million euros additional payment from Centerbridge, depending on Senvion’s performance, according to the statement.
Pune, western India-based Suzlon initially bought a 33.9 percent stake in Senvion, then known as REpower Systems AG, in 2007 after a bidding war with France’s Areva SA. That deal valued Senvion at 1.2 billion euros. It later bought full control of the business.
New York-based Centerbridge has $25 billion of capital under management, according to a statement in December.
“The global market environment for renewable energies is promising for a wind-turbine manufacturer,” Stefan Kowski, Centerbridge’s managing director, said in the statement.
Suzlon defaulted on $209 million of dollar-denominated convertible bonds in October 2012. It failed to redeem $175.8 million of zero-coupon notes and $32.8 million of 7.5 percent bonds which fell due, according to data compiled by Bloomberg.

EBITDA Climbs

The German unit’s earnings before interest, taxes, depreciation and amortization rose 22 percent in the year through March 31, while revenue dipped 19 percent in the same period, according to an investor presentation on Suzlon’s website.
“With Centerbridge, Senvion has gained a financially strong and committed investor,” Andreas Nauen, chief executive officer at Senvion, said in an e-mailed statement. “Our objective is to continue growing profitably and to gain additional market share in our top five markets in Germany, Great Britain, Australia, Canada and France, as well as in our target markets.”