Azure’s dollar bondholders appoint global law advisor fearing a technical default, ET EnergyWorld

Stock Exchange listed Azure, which raised over $750mn in two tranches from offshore bondholders, received an extension until mid-July from the exchange to disclose its FY22 audited results, failing which the stock would be delisted.

Although CDPQ and the Canadian pension fund Ontario Municipal Employees Retirement System (OMER) backed Azure has not missed its payments so far. But a breach in a covenant (caused by delisting) could trigger a technical default resulting in lenders exercising their right to recall the loan facilities.

Officials from Akin Gump Strauss Hauer & Feld confirmed to ET about the development, adding that an ad-hoc group of bondholders have engaged them for ‘protecting interest of holders of the notes.’ Some bondholders fear the company may not disclose its audited results within the stipulated deadline.

The ad-hoc group comprises note holders having an investment of at least 25 per cent of the USD 350 million 5.65 per cent senior notes due December 2024 issued by Azure Power Solar Energy Pvt Ltd and USD 414m 3.575 per cent senior notes due August 2026 issued by Azure Power Energy Ltd.

The ad-hoc group is formed to discuss “a fair and sustainable solution for holders of the notes,” said Akin in an email response to the ET.

Delisting could become an event of default if it failed to provide audited results for 60 consecutive days on receiving written notice from bondholders with 25 per cent or more aggregate principal amount of the notes, Fitch Ratings said on June 26.

The renewable energy company did not announce the result because the whistleblower report cited governance lapses, and auditor EY declined to sign off on the result.

In a January 25 this year notice to exchange, Azure has said that it is investigating specific allegations made by whistle-blowers and has been reviewing its material projects and contracts over the past three years to identify and address any issues related to anti-corruption and compliance.

Azure Power Global declared unaudited results for FY22 on December 30, but added that its audited report may differ. It reported an operational EBITDA (earnings before interest, tax, depreciation and amortisation) of Rs 420 crore against a gross debt of Rs 2,800 crore.

Azure Power India has long-term debt of Rs 1,303 crore and a bank guarantee of Rs 700 crore. Domestic lenders, too, had extended the deadline until mid-July for the company to submit audited results, people aware of the development said.

If Azure fails to disclose its FY22 results by mid-July, the exchange will begin delisting the stock, resulting in technical defaults. It will still have until 16 August- the maximum cure period for NYSE to file its annual report Securities Exchange Commission, failing which NYSE will proceed to initiate delisting procedure, the company said in a February statement.

On June 26, Fitch Ratings downgraded Azure Power Solar Energy’s offshore bonds to ‘B’ from ‘BB-‘ and Azure Power Energy’s dollar bonds to ‘B’ from ‘BB’.

“The downgrade reflects corporate governance concerns evident from the prolonged failure of management to manage annual audited financial disclosures,” Fitch Ratings said in its rating statement.

ET will update the article incorporating comments from Azure, if any.

  • Published On Jul 6, 2023 at 05:39 PM IST

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