Azure Power Global | Disturbing countdown to a big CDPQ placement

A worrying countdown awaits the Caisse de dépôt et placement du Québec (CDPQ) in India. Azure Power Global, which received nearly 600 million from Quebecers, is approaching a delisting on the stock exchange in addition to scalding its creditors. Nothing to restore vigor to this placement of the Quebec institution which has melted like snow in the sun.

The Indian solar energy producer – controlled by the Caisse with its 53% stake – has been in turmoil since last August due to allegations raised by a whistleblower about irregularities and questionable practices. Details of an internal investigation and the results scrutinized by an external auditor for the year ended March 31, 2022 are still pending.

Thanks to a deadline obtained last February, Azure must file these documents before July 15. So he only has one week left. Otherwise, the New York Stock Exchange will have the right to take steps to delist the company. This scenario seems increasingly likely.

“In our opinion, the risk of radiation is very high, underlines the firm Lucror Analytics. We believe that the company has very limited access to capital to refinance its debt. »

Still risks

This turn of events has even prompted Fitch Ratings to upgrade Azure’s credit rating from “BB-” to “B”. This means that it is a “highly speculative” investment which presents a risk of default. This is the second downgrade since the start of the year. For the New York rating agency, the management of the Indian solar producer is showing a “chronic inability” to take stock of its finances.

For Raphaël Duguay, professor of accounting at Yale University, all this raises questions about the role of operator of the CDPQ in certain companies – a shift that has begun within the manager of pension plans.

In early May, Caisse President and CEO Charles Emond suggested that it was only a matter of weeks before the Indian company presented its financial portrait for the 2022 financial year. Two months later, he is still expected.

A delisting from the New York Stock Exchange would further plunge the title of Azure, underlines Mr. Duguay. Since last August, the company’s stock, which was trading above US$48 in the winter of 2021, has plummeted on Wall Street. On Friday, it closed at US$1.68. This gives a value of 52.2 million US (69 million CAN) to the 34.25 million shares of the Caisse.

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As if that weren’t enough, creditors who hold more than US$750 million in bonds have retained the services of a law firm, Akin Gump Strauss Haur & Feld, because they are concerned. A delisting could put Azure in default with bondholders. This scenario could allow them to hasten the repayment of debts.

“The committee was formed to discuss a fair solution for investors,” the firm said in a statement emailed to The Press.

According to Fitch, a delisting from the New York Stock Exchange could be considered a default if the company was unable to submit audited financial statements within 60 days of receiving notice from creditors who jointly own more than 25% of outstanding bonds.

“All of a sudden, hundreds of millions of dollars would have to be reimbursed,” underlines Mr. Duguay. Perhaps these creditors will want additional guarantees or require other things. They might want to become shareholders, which could dilute the CDPQ’s stake. »

Even though 75% of the company’s shares are controlled by the Caisse and the Ontario Employees Retirement Plan (OMERS), the Quebec institution refused on Friday to comment on the problems that are accumulating at Azure since It is a “public company”, says its spokeswoman, Kate Monfette.

A new CEO is due to take office as of Monday at Azure.