UPDATE 2-India's Suzlon bondholders reject debt extension; shares fall


* Suzlon sought to extend maturity of over $200 mln bonds byfour months

* Two tranches of overseas convertible bonds due on Thursday

* Shares fall as much as 5 percent after bondholders rejectextension

(Adds share price, background on convertible bonds)

By Tony Munroe and Sumeet Chatterjee MUMBAI, Oct 11 (Reuters) - India's Suzlon Energy Ltd

was poised to default on redemption of more than $200million in overseas convertible bonds due on Thursday afterbondholders rejected a four-month extension, sending its sharesdown as much as 5 percent.

The world's fifth-largest maker of wind turbines was one ofmany Indian companies that rushed to tap the convertible bondsmarket before the global financial crisis, mostly to financeoverseas acquisitions.

Since then, many of the nearly two dozen companies that hadnearly $6 billion in foreign currency convertible bonds maturingthis year have been struggling to meet their debt obligationsdue to a sharp plunge in share value, feeble earnings growth anda weaker rupee.

A total of $1.3 billion of convertible bonds are expected tocome up for redemption in the October-December quarter, localbrokerage Kotak Securities said in a report last month.

Suzlon is set to become the first prominent victim of thecostly debt, after companies like Subex Ltd struggledto raise funds to redeem the bonds as their shares slumped wellbelow the trigger level for converting the bonds to equity.

"I regret to announce today that the bondholders' meetingsdid not achieve the consensus we were hoping for and thefour-month extension sought by us has not been granted," KirtiVagadia, chief financial officer of Suzlon, said in a statement.

"We expect that an acceptable solution for all stakeholderswill be arrived at the earliest possible," Vagadia said.

Suzlon has been under pressure for the last few years from aslowdown in global turbine sales and its debt pile. It posted anet loss in the April-June quarter compared with a profit in theyear-earlier period.

At the group level, Suzlon had net debt of 130.17 billionrupees ($2.45 billion) at the end of June, rising from 105.44billion rupees in the year ago period, while its cash totalled13.72 billion rupees at end-June.

Suzlon said last month it would seek approval frombondholders on Oct. 10 to extend the maturity of two thetranches of convertible bonds due on Oct. 11 by four months toFeb. 11 to give it time to raise funds to repay bondholders.

Suzlon raised $200 million through dollar convertible bondsin 2007, and the amount outstanding on this tranche was $121.4million with a conversion price of 97.26 rupees per share,according to Thomson Reuters data.

The second tranche of convertible bonds worth $20.8 millionand issued in 2009 had a conversion price of 76.68 rupees.

Shares in Suzlon dropped 5.1 percent on Thursday to 15.70rupees, while the main Mumbai market index was trading0.2 percent lower.

The stock has plunged about 83 percent in the last threeyears, wiping off $2.5 billion from its market value.


Fitch Ratings predicted in a report in February that abouthalf of the 55 companies with maturing foreign currencyconvertible bonds in 2012 were at risk of some type ofrestructuring or default.

The combination of higher domestic borrowing costs and riskaversion among global banks has made it tougher for the smallerand mid-sized Indian companies to raise funds to paybondholders.

While Subex, which provides technology services to telecomscompanies, and Educomp Solutions Ltd struggled to meettheir debt obligations this year, concerns remain about theability of some other companies, analysts say.

Loss-making GTL Infrastructure Ltd has set up acommittee to restructure its convertible bonds worth about $228million due in November. Its stock has fallen 80 percent since2011 amid concerns about its debt obligations.

In July, Suzlon redeemed $360 million of overseasconvertible bonds after bondholders agreed to a 45-day deadlineextension, allowing the company to raise bank loans for therepayment.

Investors heaved a sigh of relief after debt-laden RelianceCommunications Ltd , India's No.2 mobile operator,managed to raise $1.2 billion from Chinese banks in January toredeem its convertible bonds.

($1=53.1350 Indian rupees)(Editing by Ryan Woo)

((tony.munroe@thomsonreuters.com)(+91 22 6180 7257)(ReutersMessaging: tony.munroe.reuters.com@reuters.net))