Future Retail’s lenders reject Reliance deal over valuation
Retailer’s banks say Reliance reduced ₹24,713 cr deal value in a surprise move
MUMBAI: A clutch of lenders accounting for most of the loans to debt-laden Future Group on Thursday rejected a proposal to sell its retail, wholesale and logistics assets to Reliance Retail Ventures Ltd after the Reliance Industries Ltd unit cut the deal value in a surprise move, two people aware of the development said.
Lenders scrambling to recover dues from the Kishore Biyani-led retailer rejected the reduced valuation, these people said. They added that not only did Reliance lower the offer from the ₹24,713 crore agreed in 2020, but it also attached several conditions that need to be met for the deal to happen even at the new value. Both of them spoke on the condition of anonymity.
“Most lenders we have discussed the matter with have rejected the bid. There are also some gaps in the way payments to lenders are structured as part of the deal, and we are not in favour of approving it in the current form,” one of the two people cited above said.
Queries emailed to spokespeople for Reliance Retail, Future Retail and Future’s lead lender Bank of India, remained unanswered till press time.
While Future Retail shareholders voted on the sale plan on Wednesday, creditors cast their votes on Thursday. On February 28, the Mumbai bench of the National Company Law Tribunal, or NCLT, allowed Future Retail to convene shareholder and creditor meetings on the proposed deal with Reliance Retail. Future Group owes its lenders more than ₹27,000 crore.
According to the second person, now that Reliance has taken over several of Future Retail stores, it wants to negotiate a cheaper deal, and bankers are not comfortable with the new valuation.
In the last week of February, Reliance took possession of hundreds of stores run by Future Retail after terminating their leases. Somewhat incensed by this, lenders on 15 March published an advertisement stating that anybody dealing in the company’s assets should keep in mind that these are subject at all times to the charge of the lenders.
Future Retail’s lenders include Union Bank of India, Bank of India, Bank of Baroda, State Bank of India, Indian Bank, Central Bank, Axis Bank and IDBI Bank.
In August 2020, Reliance Retail agreed to buy Future Group’s retail, wholesale, logistics and warehousing assets on a slump sale basis for ₹24,713 crore.
The cash-strapped Future Group is trying to expedite the deal to pay creditors and save the Big Bazaar retail chain from possible collapse, even as it battles Amazon, which has sought to block the sale in various courts.
Failure to get lenders’ approval complicates matters for Future Retail, already referred to NCLT by lead lender Bank of India. Banks initially considered enforcing their interest through the Debt Recovery Tribunal (DRT); however, they chose the insolvency route since they felt the NCLT process is more transparent than the one at DRT.
Banks had approved Future Retail’s debt recast under Reserve Bank of India norms in April 2021, allowing a moratorium with retrospective effect from March 2020 to September 2021. Interest during this period was converted into a funded interest term loan (FITL) payable by December 2021. FITL is a fresh loan that helps stressed borrowers repay existing interest over time and is used in many large recasts.
However, Future Retail defaulted on its first repayment obligation of ₹3,494.56 crore due on or before December 31 and was therefore downgraded to default grade by Care Ratings. In a regulatory filing in January, the company had said that due to ongoing litigation with Amazon.com NV Investment Holdings LLC, it was unable to complete the planned monetization of the specified business as contemplated in the one-time restructuring plan to repay lenders on the due date.