Suzlon prints India’s first credit-enhanced dollar bond

Suzlon Energy, the world’s fifth-biggest wind-turbine maker, closed a $647 million bond on Tuesday — the first credit-enhanced dollar bond from India.

Featuring a standby letter of credit from State Bank of India (SBI), the bond printed at the widest guarantee premium in the market, according to a banker. However, Suzlon was at least able to raise the money. The financially troubled company defaulted on a $200 million zero coupon convertible bond last year, so would have struggled to come market without SBI’s backing.

SBI is one of Suzlon’s biggest lenders and has a large exposure to the company. The funds raised will be used to refinance existing US dollar debt, helping the bank to make progress on its debt restructuring.

“This marks an important milestone to the group and completes one of the key requirements of our corporate debt restructuring proposal, addressing our major bank debts,” said Kirti Vagadia, group finance head at Suzlon, in a release.

“The unique structure of the deal, which we believe to be the first ever US dollar credit-enhanced bond from India, gives the group much needed headroom via low-cost funding and a back-ended repayment schedule,” he added.

The five-year bonds were marketed at the 5% area and printed at a yield of 5%. Demand was modest — the deal attracted a $1.3 billion order book from 75 accounts. The bond printed at a spread of about 175bp over SBI — described by one banker as the “widest guarantee premium in the market by far”.

However, according to a source, when Zijin Mining printed its $280 million five-year bond back in 2011, one of the first few credit-enhanced bonds out of China, it offered a much wider guarantee premium. Those bonds had a standby letter of credit from Bank of China’s Paris branch and priced over 200bp wide of Bank of China’s bonds. That premium has since tightened significantly in secondary.

Suzlon’s bonds widened about 10bp to 20bp in secondary markets, amid a soft market.

Asian investors were allocated 85% and European investors 11%. Banks were allocated 45%, which is a high percentage, fund managers 11% and private banks 39%. A number of Indian banks were said to have taken part in the deal.

J.P. Morgan was the sole bookrunner. SBI Capital UK was also a joint lead manager.