BackFuture Lifestyle may get a lifeline
Firm may get a 2-year moratorium, but no concession on interest rates
PremiumLenders to Future Lifestyle Fashions Ltd have prepared a draft debt resolution plan that will give the company that runs the Central and Brand Factory outlets a two-year repayments moratorium, but no concession on interest rates, according to two bankers aware of the plan.
Future Group owes around $3 billion in loans, which bankers fear may turn sour if the legal battle with Amazon.com Inc. isn’t resolved quickly. Future Lifestyle alone owes creditors ₹1,714 crore, including the money it borrowed by selling non-convertible debentures (NCDs), according to CARE Ratings.
_1616350426164.jpg "Future Lifestyle alone owes creditors ₹1,714 crore, including money it borrowed by issuing non-convertible debentures, according to CARE Ratings")
With the Future Group’s ₹24,713 crore deal with Reliance Industries Ltd stalled again by a recent Delhi high court order, bankers are preparing loan recast proposals for Future Group companies, including Future Lifestyle and Future Retail Ltd (FRL). This, as Mint reported earlier, is a backup plan and will be implemented if the deal with Reliance Retail collapses.
The total debt under the purview of this recast is ₹2,007 crore, including NCDs of ₹125 crore, the bankers said on condition of anonymity. They said that the plan has received an RP4 rating from credit rating companies, the minimum level required to qualify for a recast plan under the Reserve Bank of India’s 6 August circular.
“The residual tenure of the term loan will be extended by 24 months, with repayments commencing in the December quarter (Q3) of FY23," said one of the bankers cited above. The plan has not been approved by the committee of lenders for Future Lifestyle.
A tussle over the assets of Future Group between two of the world’s richest men—Mukesh Ambani of Reliance and Jeff Bezos of Amazon—has left lenders scrambling to ensure that they can recover loans made to the Future Group. Bankers have signed inter-creditor agreements, a precursor to debt recast, ensuring that all lenders are on the same page and avoid delays in approvals. Last year, banks invoked the debt recast after RBI clarified that lenders could do so even without a resolution plan. Now, banks have time till the end of June to implement the resolution plan.
“The company (Future Lifestyle) has non-convertible debentures of ₹350 crore subscribed by three institutions. Of this, ₹125 crore, subscribed by a private bank, is under the purview of the resolution plan, while the rest are not," said the second banker. He added that the lenders are still in discussions with Kotak Mutual Fund to bring the ₹100 crore NCDs held by Kotak Credit Risk Fund under this repayment deferment plan.
Emails sent to State Bank of India (SBI), Future Group and Kotak Mutual Fund remained unanswered.
On 18 March, following an appeal by Amazon against Future Group, a single-judge bench of the Delhi high court ordered FRL not to take any further step towards selling its assets to Reliance, while holding that FRL has “wilfully violated Singapore International Arbitration Centre’s emergency order" with regards to the deal. Future Group has decided to challenge the Delhi high court order.
Analysts said under current circumstances, it may take longer for the Reliance-Future deal to materialize, and if there is an unfavourable verdict, there is a risk of Future’s assets going to the competition and Reliance Retail losing a potential upside from the vast retail store network and supply-chain capabilities of Future Group.
“In case the deal is nixed, the creditors may take the company to the Insolvency and Bankruptcy Code (IBC) and there, there may be other suitors for the company," said Arvind Singhal, chairman and managing director at Technopak Advisors, India.
Reliance Retail is the largest retailer in India with a network of 12,200 retail stores.
“It (Future Group) is a good business. So, I don’t think the business will shut down. It may change hands and financial creditors, and suppliers may certainly take a hit," said Singhal.
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