Lenders to India's Future reject $3.4 retail deal with Reliance - sources

Future Retail

22/04/2022 10:26

By Nupur Anand and Abhirup Roy
    MUMBAI, April 22 (Reuters) - Lenders to India's Future Group
rejected a $3.4 billion deal for its retail assets from Reliance
Industries, banking sources said, adding to troubles at the firm
which has been struggling to pay off debt since its business 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 has been
entangled in legal issues and now we are unsure of the value
left in it," the source said. 
    The rejection by lenders come amid a long-drawn legal
challenge by U.S. e-commerce giant Amazon.com Inc  AMZN.O  that
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 has 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 been in the shadows
through 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 the firm. 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 eyebrows at the lenders.
    "The bondholders are getting preferential treatment and that
is not something that is palatable to the bankers," said another
banker, adding that this was another reason for rejecting the
deal.
    Lenders are getting ready for a long-drawn 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; Editing by Kim
Coghill)
 ((Nupur.Anand@thomsonreuters.com; +9122 68414388;))