Jurisdiction - India
India – Allen & Overy Advises On Country’s First Credit-Enhanced Dollar Bond.

10 April, 2013


Allen & Overy has advised J.P. Morgan and SBI Capital UK as joint lead managers on the issuance of USD647 million 4.969% Regulation S bonds (the "Bonds") by AE-Rotor Holding B.V. (the "Issuer"), the wholly-owned Dutch subsidiary of Suzlon Energy Limited ("Suzlon"). These Bonds are understood to be the first ever credit-enhanced dollar bonds from India. The Bonds have the benefit of an unconditional and irrevocable standby letter of credit ("SBLC") issued by State Bank of India ("SBI").
Suzlon, the world's fifth largest wind turbine supplier, has operations that extend across Asia, Australia, Europe, Africa and North and South America.  Sulzon is currently undergoing a restructuring of its indebtedness and has been accepted into the corporate debt restructuring (“CDR”) mechanism in India, which is a non-statutory voluntary mechanism under the aegis of the Reserve Bank of India. The bond offering was part of the agreement under which Sulzon was required to refinance part of its non-Rupee denominated indebtedness.
The structuring of the transaction involved many novel aspects, including the following:

•    As a result of the SBLC, the Bonds were rated at the same credit rating as SBI’s debt.  This provides the Issuer and Suzlon access to the capital markets at lower interest rates than would otherwise be available.
•    The Bonds have a pre-funding mechanism under which in the event of a failure by the Issuer to pre-fund, the trustee will automatically declare an event of default and make a demand under the SBLC. 
•    The events of default under the terms and conditions provide automatic recourse to the SBLC once called.  Bondholders will receive the full amount of principal and accrued interest, even if the Issuer receives bankruptcy protection.  This does not require the bondholders to get involved with lengthy claims procedures.
•    The structure was devised to reduce insolvency claw back risk on payments by the Issuer which could happen, under the laws of the Issuer's jurisdiction, where the recipient of a bond payment knows that the company is insolvent.  The terms therefore require the Issuer to provide solvency certificates in connection with any payment under the bonds.  If the Issuer failed to provide such a certificate, or if the Issuer's creditors petition to have it dissolved or wound up, the SBLC will automatically be draw upon. Payments made under the SBLC, not being payments by the Issuer, would not be subject to the clawback risk.
The Allen & Overy team was led by Hong Kong partner James Grandolfo, who was assisted by counsel Amit Singh and associate Garrick Merlo.

For further information, please contact:


James Alexander, Allen & Overy


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