UPDATE 1: 5:57 a.m. ET 6/9/2023: The USD notes of Indian renewable energy company Azure Power Global Ltd. were down around four points after Reorg
reported that the New York Stock Exchange-listed solar power producer is likely to solicit consent from its USD bondholders to amend some of its bond covenants pertaining to disclosure obligations to avert a potential event of default on the bonds.
The company is likely to schedule one-on-one meetings with the bondholders as early as next week, according to one sell-side and two buy-side sources.
The $350.1 million 5.65% notes due 2024 issued by Azure Power Solar Energy Pvt. Ltd., a wholly-owned subsidiary of Azure Power Global, were indicated to be at around 80/83 in the evening trade, down from 84.375/86.375 earlier today, June 9. Concurrently, the $414 million notes due 2026 issued by Azure Power Solar Energy were indicated to stand at 72/75 in the evening as against 76/78 earlier today.
Azure seeks to avoid triggering a potential default event stemming from delays in filing its audited results for the financial year ending March 31, 2022, a source close to the situation said, as previously reported.
Original Story 3:28 a.m. UTC on June 9, 2023
Azure Power Plans to Solicit USD Bondholder Consent to Amend Bond Terms, Retains Mayer Brown
Azure Power Global, an Indian solar power producer listed on the New York Stock Exchange, plans to solicit consent from its U.S. dollar bondholders to amend some of its bond covenants pertaining to disclosure obligations. Azure seeks to avoid triggering a potential event of default due to delays in filing its audited results for financial year ending March 31, 2022, a source close to the situation, and two sources familiar with the situation said.
The company appointed law firm Mayer Brown for the consent solicitation process, two of the sources said, speaking on condition of anonymity.
The solar power producer has not been able to publish its audited financials and annual report, which were initially scheduled to be filed by Aug. 1 2022, for the 2022 financial year. The delay was due to ongoing audits at its projects amid whistleblower complaints alleging data manipulation at plants, and corporate misgovernance and misconduct, as
reported. The company says it has launched audits to look into the allegations.
Azure has sought multiple extensions - most recently up until the end of July 2023 - from its secured onshore financial creditors for publishing its audited results. Doing so would avoid a breach of the loan covenants due to information disclosure delays, as
reported.
The company now faces a delisting risk from Aug. 16, 2023, onwards if it does not publish its audited financials and annual report, as
reported. Azure expects to be delisted from the NYSE and is therefore engaged in discussing amending its covenants internally, sources said.
According to the bond offer circular for Azure’s $350 million 5.65% bonds due December 2024, an event of default can be triggered after 60 days of a written notice being served to the company by the holders of 25% or more bonds in aggregate principal amount of the notes for breach of conditions in the indenture.
No Timeline for Audited Results
Azure has yet to announce a timeline for filing its audited financials with the U.S. Securities and Exchange Commission, as
reported. The company’s management has maintained during its conversation with bondholders that allegations in the whistleblower complaints do not pertain to any projects in restricted groups that utilize the dollar bond proceeds to subscribe to onshore INR debt issuances.
However, the company has yet to declare audited results for the restricted groups as well. In December 2022, the company declared
unaudited results for the restricted groups.
The company is still in the process of auditing 24 of its special purpose vehicles, or SPVs - eight of which are being excessively scrutinized by the company’s auditor, EY, sources said.
The May 2022
whistleblower complaint alleged health and safety lapses, procedural irregularities, misconduct by certain employees, corrupt payments and false statements relating to a project belonging to one of Azure’s project subsidiaries.
“Following extensive investigations by both internal and external counsel and forensic professionals, the Group identified evidence of manipulation and misrepresentation of project data by some employees at that project site,” Azure said. “Weak controls over payments to a vendor of the subsidiary and failures to provide accurate information both internally and externally were found, but no direct evidence that a corrupt payment was made to any government official was identified.”
In September 2022, the company received an additional whistleblower complaint, making largely similar claims, in addition to allegations of misconduct related to joint ventures and land acquisition, and assertions of Azure’s failure to be transparent with the market and advisors, among other allegations, according to the notification Azure sent to the SEC.
Azure Power’s spokesperson did not respond to requests for a comment. Similarly, Mayer Brown’s spokesperson could not be reached immediately for a comment, and an EY spokesperson did not respond to a request for a comment.
– Malvika Joshi