Lenders lay groundwork for restructuring of Future’s debt
Lenders to Future group have signed inter-creditor agreements (ICA), paving the way for a potential restructuring of the group’s stressed loans, two people aware of the development said.
The move by the lenders, comprising a clutch of banks, is part of a contingency plan to cope with a possible collapse or inordinate delay of Reliance Industries Ltd’s (RIL’s) planned acquisition of Future group’s assets because of Amazon.com Inc.’s legal challenge, the people said, requesting anonymity.
Amazon, an investor in Future Coupons Pvt. Ltd, is seeking to stall the deal, citing breach of a non-compete agreement.
Banks have time till December 31 to agree on a resolution plan if they wish to restructure these loans, according to norms released by the Reserve Bank of India in August.
They will have an additional six months to implement the plan.
“We still have close to two months before invoking the resolution plan, the contours of which are being worked out at the moment,” said one of the two people cited above.
However, a failure to reach an agreement among the lenders could push Future group, which runs more than 1,500 retail outlets, including Big Bazaar stores across the country, into insolvency.
The Reserve Bank of India has allowed banks to restructure loans to stressed borrowers without classifying them as bad loans, provided they meet the criteria set by it.
“It remains to be seen whether Future group’s projected cash flows support a restructuring proposal,” said a third person, a senior banker. “A lot is riding on the overall recovery of the business environment, in the absence of which a debt restructuring of the group will likely become untenable,” the third person said.
Future group owes around $3 billion in loans, which in the event of a protracted legal battle with Amazon, may turn sour.
Significantly, under the proposed terms of the transaction between Reliance Retail Ventures Ltd and Future Enterprises Ltd, which has an enterprise value of ₹24,713 crore, lenders will not have to take any haircut.
Of the loans given to Future group firms, an Axis Bank-led consortium has an exposure of ₹16,000 crore and a Bank of India-led consortium has ₹5,750 crore.
The Future group also owes money to mutual funds that had invested in securities sold by group entities, including Rivaaz Trade Ventures, NuFuture Digital India and Future Ideas Co.
What once looked like a sealed deal has turned into a legal battle between two of the world’s richest men—Mukesh Ambani and Jeff Bezos. Amazon bought a 49% stake in Future Coupons for ₹1,430 crore in 2019 on the condition that without its consent, Future and its promoters cannot sell any stake or forge any alliance with 30 retail entities, including Reliance Industries.
Thereafter, when Reliance Retail acquired Future’s retail and wholesale assets on August 29, Amazon moved the Singapore International Arbitration Centre on October 8.
Following that, an emergency arbitrator on October 25 backed Amazon, restraining Future from going ahead with the transaction.
Future group and Reliance Industries, both have, however, declared their intent to complete the transaction.
The deal with Reliance Industries is also important for Future’s retail assets to preserve value, according to the second person cited above.
A prolonged delay may lead to the erosion of the value of the assets.
According to the second person, a one-time restructuring plan is being worked out with banks, given the deal completion would take five more months. The banks, this person said, have agreed to it as they do not wish to show defaults on their books.
An email sent to Future group did not elicit any response
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