India's Suzlon Energy is looking to use letters of credit (L/Cs) to back a credit enhanced bond as the heavily indebted wind turbine manufacturer seeks to refinance a US$658 million loan that matures later this month.

Suzlon has been working on restructuring its debt since it defaulted in October 2012 on US$200 million of foreign currency convertible bonds.

Standby L/Cs

The wind turbine manufacturer is planning to offer five-year US dollar bonds during March that feature credit enhancement in the form of standby L/Cs from a group of Indian banks.

If the bonds are backed by L/Cs, investors are effectively taking a risk on Indian banks rather than Suzlon.

Better yields

This should mean that the yields on such credit enhanced bonds would be more similar to the yields of these banks rather than a struggling wind turbine manufacturer.

Analysts reckon this could attract a credit rating of around BBB- to the bonds.

Credit support on the Suzlon deal is expected from the 19 Indian lenders with a stake in a US$658 million US dollar loan maturing on 23 March.

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