Tag: Future Group

Future group lenders are staring at legal proceedings following the SC ruling against its deal with Reliance Retail.

They have more to worry about as $14 million of coupons, falling due later this month, could be a trigger for some debt investors to suggest legal measure against the Future Group if the local retailer fails to meet its financial commitment to bondholders.

Bond investors, who own a minority portion of Future Group’s aggregate debt liability of Rs 21,000 crore, may be more eager than banks to initiate legal proceedings in the event of missed coupon payments after the last week’s Supreme Court order stalled a vital deal with Reliance Retail.

Banks, although unsure about the recovery prospects of the bulk of the Rs 21,000-crore of debt they own, fear that the payout could be lower through the insolvency mechanism.

The group has very little immovable property that can be sold. All its assets are in the form of inventory and receivables that are very difficult to recover. The Reliance-led plan is the best option right now because the recovery will be very low in the bankruptcy courts.

The restructuring

Local and overseas banks — 28 of them led by Bank of India — were counting on Reliance Retail’s takeover of the Future Group for recovery of their dues.

In April, the K V Kamath Committee set up by the Reserve Bank of India (RBI) approved a proposal by the lenders to restructure loans to Future Retail and

Future Enterprises, the main units of the Kishore Biyani-led group. Bank of India is the lead lender among the 28 local and overseas financiers that floated the loan recast plan.

According to that deal, Future Group had promised to pay banks Rs 6,900 crore in two tranches by the end of FY22, mainly by selling its small-format stores.

This would allow lenders to convert the short-term loans, non-convertible debentures and overdue working capital loans into term loans, which were to be repaid in two years. The group has not yet identified any buyers for these stores.

Bankers had agreed on the deal as a temporary arrangement on expectations that the Reliance takeover will be completed soon, meaning the lenders would no longer depend upon Future to make the payments.

With this latest court order, all such plans will have to be reconsidered.

The group firms

Future Retail is the largest debtor in the group, with about Rs 10,000 crore of dues. Two other listed companies — Future Enterprises that holds its supply chain, and Future Lifestyle Fashions that houses apparel brands such as Central and Brand Factory — add another Rs 11,000 crore to the debt pile.

Lenders had agreed to an interest moratorium between March 1, 2020 and September 30, 2021. They had also agreed upon waiving all penal interest and charges, default premiums and processing fees unpaid since March 2020 to the date of the implementation of the Reliance Retail takeover.

There is some respite in the central bank’s extension of the timeframe for meeting the financial parameters for companies undergoing restructuring.

What CARE said

Future Enterprise’s liquidity profile has been severely impacted on account of lockdown measures and weakened credit profile of its key customer, Future Retail, CARE Ratings had said in April this year.

“The inability of FEL to realise its debtors during the pandemic and shut down operations during Q1 of FY21 led to a cash crunch, increase in debtor days and subsequently default on its debt service obligations. There have been substantial delays in receipt from group entities and subsequent receipts have not been significant,” CARE had said in April.