Lenders to Future Group, Signed ICA for Potential Restructure of Group’s Stressed Loans
By: Ashwathy Nair
- It is a part of the contingency plan to cope with possible collapse or inordinate delay of RIL’s planned acquisition.
- Reserve Bank has allowed restructuring loans to stressed borrowers.
- Future groups also owe money to mutual funds that had invested in securities sold by group entities.
Inter-Creditor Agreements (ICA) have been signed by Lenders to Future Group, opening the way for a possible restructuring of the stressed loans of the group.
The lenders move, in order to comprise a clutch of banks is a part of a contingency plan that will help to cope with a potential failure or excessive delay of the expected acquisition of Future Group assets by (RIL) Reliance Industries Ltd. due to the legal challenge of Amazon.com Inc.
Amazon being an investor in Future Coupons Pvt. Ltd., tries to block the deal, alleging violations of a non-compete agreement.
Banks have got a time till 31st December to agree on a resolution plan if they wish to restructure such loans in compliance with the standards published in August by the Reserve Bank of India.
To execute the programme, they will have an extra six months.
“We still have nearly two months until the resolution strategy is enforced, the contours of which are currently being sorted out”
A failure to reach an agreement between the lenders, however, could drive Future Company, which runs more than 1,500 retail outlets across the country, including Big Bazaar stores, into financial distress.
Without classifying them as bad loans, the Reserve Bank of India has allowed banks to restructure loans to stressed borrowers, provided they meet the requirements set by it.
“It remains to be seen if the expected cash flows of the Future Company favour a restructuring plan.”
“A great deal is motivated by the overall stabilisation of the business climate, in the absence of which the group’s debt restructuring is likely to become untenable.”
Around $3 billion in loans is owned by the Future Groups, which may turn bitter in the event of a prolonged legal battle with Amazon.
The Future Group also owes the money to mutual funds, including Rivaaz Trade Ventures, NuFuture Digital India and Future Ideas Co., which have invested in shares sold by group entities.
What once looked like a sealed deal has turned into a legal fight between Mukesh Ambani and Jeff Bezos, two of the world’s richest men. In 2019, Amazon purchased a 49 per cent of stake in Future Coupons for 1,430 crores on the condition that Future and its promoters are unable to sell any stake or establish any partnership with 30 retail organizations, including Reliance Industries, without its approval.
For Future’s retail assets, the deal with Reliance Industries is important as to preserve value.