Lenders to India's Future reject $3.4 bln retail deal with Reliance - sources (updated)

Future Retail

22/04/2022 12:17

(Updates with bond movement)
    By Nupur Anand and Abhirup Roy
    MUMBAI, April 22 (Reuters) - Future Group's lenders have
rejected a $3.4 billion sale of the Indian group's retail assets
to Reliance Industries, banking sources said, adding to Future's
struggles to pay off debt after it was hit hard by the COVID-19
pandemic. 
    "All secured lenders have voted against the scheme of
arrangement put forward by Reliance," said a senior executive at
a state-owned lender.
    "Initially we thought that any other alternative methods
will result in lower recoveries but since then it (Future) has
been entangled in legal issues and now we are unsure of the
value left in it," the source said. 
    The rejection by lenders comes amid a legal challenge by
U.S. e-commerce giant Amazon.com Inc  AMZN.O  which has accused
Future of violating certain contracts by dealing with Reliance
 RELI.NS , run by India's richest man, Mukesh Ambani.
    Future has denied any wrongdoing and said it will be pushed
to bankruptcy if the deal falls through. The case is being heard
at various legal forums, including an arbitration panel in
Singapore.
    But in February Reliance, which had kept to the sidelines
earlier in the dispute, suddenly took control of hundreds of
Future stores, citing non-payment of rent, after assuming many
of the leases held by cash-strapped Future.  urn:newsml:reuters.com:*:nL3N2V7251
    That spooked bankers, some of whom have already initiated
debt recovery proceedings against Future. 
    Future Group as a whole has more than $4 billion in debt and
lenders started classifying the loans as non-performing assets
(NPA).  urn:newsml:reuters.com:*:nL3N2VO1V6
    Typically, banks which are secured creditors are accorded
the highest priority during debt resolution. However, in this
case, Reliance in regulatory filings has assured bondholders of
full recovery, raising concerns at the lenders.
    "The bondholders are getting preferential treatment and that
is not something that is palatable to the bankers," said another
banker, adding this was a further reason for rejecting the deal.
    The yield on Future Retail's bond maturing in January 2025
 USY267BJGT59=TE  jumped to a record high of 88.906% on Friday,
compared with its close of 37.680% on Wednesday.
    Lenders are getting ready for a lengthy battle in bankruptcy
court which can take years to resolve, sources said.
    Future and Reliance did not respond to requests for comment.

 (Reporting by Nupur Anand and Abhirup Roy
Additional reporting by Gaurav Dogra
Editing by Kim Coghill and Mark Potter)
 ((Nupur.Anand@thomsonreuters.com; +9122 68414388;))