Future’s bad debt resolution hangs in the balance
MUMBAI: Lenders to Future Group have not initiated formal talks on a bad loan resolution plan and are instead pinning their hopes on a favourable outcome of the legal battle between the Indian retail chain and Amazon.com Inc.
“We don’t want to keep changing our plans. If Reliance is able to buy Future assets, we will be saved from haircuts,” a senior executive at a large bank said on condition of anonymity.
He added that the consensus right now is to wait for the judgment, hoping it is the end of the legal tussle, and then look at a plan, perhaps in March.
Future Group owes around $3 billion to lenders, who are trying to ensure they don’t have to take a haircut. The group also owes mutual funds that had invested in securities sold by group entities, including Rivaaz Trade Ventures, NuFuture Digital India and Future Ideas Co. If Future Group fails to get a favourable verdict, it will add to the pile of bad assets of Indian banks, which are already saddled with soured loans worth ₹7.38 lakh crore.
Being cited as a “Plan B” since late last year, the debt recast plan will come into play if the ₹24,713-crore deal between Reliance and Future fails. However, given the delay in the process and with multiple rulings already, some in favour of Future and others against it, bankers said they do not want to commit to any resolution plan. They have time till June to finalise a resolution plan and implement
it.
“See, if the Future-Reliance deal happens, then we just have to reorganize some of the existing debt structures. However, if it does not, our recoveries will be hit and so our strategy is to wait and watch for the SC verdict,” said a second banker, also requesting anonymity.
The Reserve Bank of India (RBI) had allowed lenders to invoke debt recasts, even without any resolution plan by December 31. Future’s lenders decided to do so and signed inter-creditor agreements to bring all lenders on board.
That said, both bankers confirmed that there is no resolution plan at present. The legal battle over ownership of Future group is being fought between two of the world’s richest men: Jeff Bezos of Amazon and Mukesh Ambani of Reliance Industries Ltd, each eyeing a bigger pie in India’s retail market.
Emails sent to State Bank of India, Future Group and Reliance Retail remained unanswered.