Future Group creditors scramble to recuperate $2.5 billion loans
17 February, 2021
Future Group’s creditors are exploring options to recuperate a lot more than $2.5 billion in loans, amid worries the Indian retailer’s planned sale of assets to Reliance Industries could fail, four bankers with knowledge of the matter said.
Future may deal with liquidation if the offer, already mired found in legal wrangling, falls through and banks are actively discussing another one-time restructuring choice that could include a less strenuous repayment tenure and fresh capital infusion, the persons said on state of anonymity as the talks are individual.
“Without Reliance, there is absolutely no future for Future,” one of the bankers at a significant state-owned lender said.
Bankers have discussed a good restructuring plan during the past week and so are drawing up a blueprint, the sources said.
Future’s top financial lenders include India’s largest lender State Lender of India, along with small rivals Bank of Baroda and Lender of India.
The three banks, Future Group and Reliance didn't immediately react to requests for comment.
Future, India’s No.2 store with an increase of than 1,700 retailers, has been strike hard by the pandemic and decided to sell almost all of its retail resources to Mukesh Ambani-led Reliance in a $3.4 billion offer.
The transaction, even so, has faced legal hurdles with e-commerce giant Amazon.com alleging that Potential, by agreeing to market assets to Reliance, was first violating conditions of a package the U.S. organization had struck with a Future Group entity.
Potential denies any wrongdoing.
The offer was temporarily blocked by a New Delhi court but subsequently the order was struck downwards. Amazon has now taken the matter to India’s Supreme Courtroom.
The Future-Reliance deal can help creditors recover up to 80% of their dues, the four bankers estimate.
The troubled retailer’s over $2.5 billion debt incorporates loans from banks and bad debts to operational creditors.
‘BLEAK SCENARIO’
Future, which this past year availed financing moratorium amid the pandemic, has got since defaulted on repayments, the resources said.
The defaults, in conjunction with the legal challenge, are now forcing banks to earnestly explore a one-time restructuring plan under an inter-creditor agreement signed this past year, they added.
“Even though the restructuring program was discussed in the 3-4 meetings we'd, we hadn’t given it much thought since it was always plan B. Today with the Reliance deal stuck, we must take it seriously,” a second banker said.
Although the restructuring plan continues to be being firmed up, it may include featuring easier repayment options to Future, including a moratorium for a couple quarters, the bankers said.
Banks could also look at change of debt to collateral, two of the bankers said.
The plan being discussed, however, would need Potential to bring a “sizeable” amount of capital to the table and need loan providers to pump in fresh funds, both bankers added.
“One’s looking at a very bleak scenario because there’s no cash flow happening at Potential,” the first banker said, adding loan providers are wary about putting in additional money into the retailer.
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