Senvion puts itself into administration before debt holders do

Germany wind turbine maker Senvion has put itself into self-administration in the hopes that it can agree a finance offer before it runs out of cash. It is discussing a new cash offer with lenders and existing bond holders.

On the surface its balance sheet looks fine – at the end of September last year, it’s last public statement on its cash position – it had €146 million in liquid assets and in 2016 its finances were shored up by a rights offer.

But to counter that, Senvion held about €400 million more in inventory than it did this time last year, due to work it has been unable to complete, and it owes €100 million more in trade creditors and it has received around €360 million more in advanced payments. As a result those last quarterly accounts, now 6 months out of date, showed revenues down from €1.3 billion in the 3 quarters to September 30, to just €808 million. Most of that problem was in a slowness in deals closing in Germany and the UK, which almost halved against previous years – we suspect this is where the incomplete deals are.

But Senvion’s forward order book is exceptionally healthy, and it seems like there is a healthy business in there to save, going up from €2.6 billion to €3 billion in the last quarter alone, but within that there are €2 billion in firm orders and another €1 billion based on various conditions, in new markets like India, USA and Spain. Assuming that this is still the case in its current figures, then this would be a good asset in the hands of a company with plenty of money, and although a sale has not been mentioned, to us this looks like a sale proposition. One thing that appears not to have happened is that all those delayed orders, which were due to close out and pay in the first quarter of 2019, have not happened. Perhaps some of those have cancelled or frozen pending an outcome of this administration. We would expect money to be found, but it may be contingent upon a buyer also being found.

It must be expected that manufacturers and operators of wind turbines will come under financial stress and consolidate to larger and larger conglomerations, due to the industry consistently driving down costs for wind turbines over a decade long plummet in cost per MWh delivered.

The petition it has filed is supported by the main shareholder Centerbridge, lenders and major bond holders and CEO Yves Rannou said, “Based on our core business strengths, we aim to use the self-administration proceedings to focus on restoring a profitable and sustainable business for our group faster. We are in the process of discussing financing options. If successful, we may be able to exit the initiated process successfully. Our employees, customers and suppliers will be critical on this journey.”

Under the self-administration, the management team will remain the same and it will carry on trading. Senvion also put out a release saying it had received agreement from debtholders on changing some terms in its outstanding debt Notes, so that a majority of its holders must give agreement before pursing the company in the event of a default. That looks like it creates some very temporary breathing space and may be a precursor to another debt funder coming on board, ahead of old money.