Suzlon to raise through FCCB; buys REpower

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Wind turbine

Suzlon Energy, one of the largest manufacturers of wind turbine generators will raise Rs 5000 crore by issuing Foreign Currency Convertible Bonds (FCCBs) in India. Meanwhile, the company will also initiate the proceedings to "squeeze-out" the minority shareholder of REpower Systems AG and delist the company.

Suzlon Energy in its press release stated, "The securities issue committee of the board has approved the issuance of foreign currency convertible bonds due 2016 to be listed on Singapore Exchange Securities Trading Ltd with a floor price for the conversion of the bonds at Rs 46.05".

In its bid to grow fast Suzlon went for acquisitions with debt. With the crisis hitting the world in 2008, its interest payments went high, debt piled further more and profits reduced.

This mounting pressure on the balance sheet forced the company to restructure part of its US $500 million FCCB.

Further the company stated that it has completed the acquisition of 95.16% stake in REpower. This will empower the company to start a buy-back from the German firm's shareholders.

Through its subsidiary AE Rotor Holdings BV, Suzlon started acquiring stake in REpower from 2008 in a phased manner till 2009. This will make REpower a wholly owned subsidiary of Suzlon.

Suzlon in its notice to the Bombay Stock Exchange stated, "The squeeze-out will be subject to additional expenditure, completion of procedural steps and timing requirements as may be required by German laws and regulations."

With this move, Suzlon Energy can now leverage the nearly debt-free balance sheet of REpower and also use its cash on books to reduce its own debt obligations.

Under German law, unless the majority shareholder has a stake of more than 95%, the balance sheet cannot be used to raise debt. Stringent German laws doesn't allow Suzlon the access to REpower's technology. 

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