Future Group creditors scramble to recover $2.5 bln loans amid Reliance deal woes -bankers

Future Consumer

16/02/2021 08:06

* Bankers exploring one-time restructuring option for Future
group
    * Lenders concerned liquidation scenario cannot be ruled out
    * Restructuring plan may include easier repayment option
    * Banks may look at conversion of debt to equity

    By Nupur Anand
    MUMBAI, Feb 16 (Reuters) - Future Group's creditors are
exploring options to recover more than $2.5 billion in loans,
amid worries the Indian retailer's planned sale of assets to
Reliance Industries  RELI.NS  could fail, four bankers with
knowledge of the matter said.
    Future may face liquidation if the deal, already mired in
legal wrangling, falls through and banks are actively discussing
an alternate one-time restructuring option that could include an
easier repayment tenure and fresh capital infusion, the people
said on condition of anonymity as the talks are private.
    "Without Reliance, there is no future for Future," one of
the bankers at a major state-owned lender said.
    Bankers have discussed a restructuring plan in the past week
and are drawing up a blueprint, the sources said.
    Future's top financial creditors include India's largest
lender State Bank of India  SBI.NS , along with smaller rivals
Bank of Baroda  BOB.NS  and Bank of India  BOI.NS . 
    The three banks, Future Group and Reliance did not
immediately respond to requests for comment.
    Future, India's No.2 retailer with more than 1,700 stores,
has been hit hard by the pandemic and agreed to sell most of its
retail assets to Mukesh Ambani-led Reliance in a $3.4 billion
deal.  urn:newsml:reuters.com:*:nL4N2IB3MD urn:newsml:reuters.com:*:nL4N2I53AL
    The transaction, however, has faced legal hurdles with
e-commerce giant Amazon.com  AMZN.O  alleging that Future, by
agreeing to sell assets to Reliance, was violating terms of a
deal the U.S. firm had struck with a Future Group entity. 
    Future denies any wrongdoing.  urn:newsml:reuters.com:*:nL1N2KH06Q
    The deal was temporarily blocked by a New Delhi court but
subsequently the order was struck down. Amazon has now taken the
matter to India's Supreme Court.  urn:newsml:reuters.com:*:nL1N2KH06Q
    The Future-Reliance deal will help creditors recover up to
80% of their dues, the four bankers estimate. 
    The troubled retailer's over $2.5 billion debt includes
loans from banks and money owed to operational creditors. 
            
    'BLEAK SCENARIO'
    Future, which last year availed a loan moratorium amid the
pandemic, has since defaulted on repayments, the sources said.
    The defaults, coupled with the legal battle, are now forcing
banks to seriously explore a one-time restructuring plan under
an inter-creditor agreement signed last year, they added.
    "Even though the restructuring plan was discussed in the 3-4
meetings we had, we hadn't given it much thought because it was
always plan B. Now with the Reliance deal stuck, we need to take
it seriously," a second banker said.
    Although the restructuring plan is still being firmed up, it
may include providing easier repayment options to Future,
including a moratorium for a few quarters, the bankers said.
    Banks may also look at conversion of debt to equity, two of
the bankers said.
    The plan being discussed, however, would need Future to
bring a "sizeable" amount of capital to the table and need
lenders to pump in fresh funds, the two bankers added. 
    "One's looking at a very bleak scenario because there's no
cash flow happening at Future," the first banker said, adding
lenders are wary about putting in more money into the retailer.

 (Reporting by Nupur Anand; Additional reporting by Abhirup Roy;
Editing by Euan Rocha and Himani Sarkar)
 ((Nupur.Anand@thomsonreuters.com; +9122 68414388;))