Lenders in talks with Future Group to find alternatives

By: |
August 11, 2021 6:15 AM

Lenders had been hopeful of a takeover of the company by Reliance Retail before that date

The fight between Future Group and Amazon has been going on since October 25, 2020, when the Singapore’s Emergency Arbitrator passed an interim order restraining FRL from going ahead with its deal with Reliance Retail.The fight between Future Group and Amazon has been going on since October 25, 2020, when the Singapore’s Emergency Arbitrator passed an interim order restraining FRL from going ahead with its deal with Reliance Retail.

Lenders to the cash-strapped Future Group are in talks with the retail giant as well as Reliance Retail to figure out alternative means of debt resolution for Future Retail in the wake of the Supreme Court’s August 6 verdict, according to two bankers.

The moratorium extended to Future Retail under the Covid-19 resolution framework 1.0 will come to an end on September 30. The interest during the period shall be converted into a funded interest term loan payable by December. Lenders had been hopeful of a takeover of the company by Reliance Retail before that date.

Some bankers are also betting on the possibility of Amazon coming to the rescue of the group. “We are not too worried at this stage because the first tranche of payments are due only in December. In the meantime, even Amazon might work something out,” said one of the bankers bankers FE spoke to. So far, there has been no move to increase provisions against the group’s liabilities in the wake of the SC verdict.

Banks are also hopeful that since the verdict applies to Future Retail alone and not to the group’s other brands, the chances of recovery remain strong.

“We are in touch with Future as well as Reliance to see if alternatives for resolution can be worked out. We will see if they are planning to seek a review of the court decision or not,” said another senior banker. He added that there is some uncertainty on what options can and cannot be explored in this case because the account has already been restructured under the framework announced on August 6, 2020, after being approved by the Kamath committee.

On August 6, the apex court upheld the Singapore International Arbitration Centre’s (SIAC’s) emergency arbitrator award restraining Future Retail from going ahead with its Rs 24,713-crore merger deal with Reliance Retail. Future Retail will now have to wait for the final order of the SIAC, which concluded the hearings last month.

The latest verdict complicates the recovery plans of Future Retail’s lenders, to whom the company owes Rs 6,278 crore, according to a rating report dated March 31, 2021, by Care Ratings. The retailer ran into difficulties in debt servicing after the outbreak of Covid-19 in early 2020, affected its operations and liquidity position. Future Retail had availed both phases of the moratorium announced in 2020 as part of the Covid-19 regulatory package announced by the Reserve Bank of India (RBI).

Thereafter, Future Retail applied for the One Time Restructuring (OTR) facility under RBI guidelines issued on August 6, 2020. “Further Future Retail did not make debt repayments that were due on September 30, 2020, to its lenders as the OTR process has been initiated,” Care Ratings said in its rating rationale, adding that the successful implementation of restructuring remains a key rating monitorable.

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