Lenders are preparing to haul Future Retail Limited (FRL) through an insolvency process. The creditors led by Bank of India have invited bids from insolvency professionals by the close of Tuesday (March 29) to steer the debt-defaulting entity through the IBC process.
They are also exploring the option to tap the debt recovery tribunal to get back over Rs 14,000 crore.
Future creditors entered the field after Reliance took control of almost 200 stores and issued termination notices to 835 more outlets as the troubled retailer failed to make lease payments.
The Reliance move put the lenders who had charge over the company assets in a spot. They were weighing recovery actions amid settlement talks between the Kishore Biyani group and Amazon. FRL reportedly owes close to Rs 18,000 crore, with around Rs 3,500 to bond holders.
With negotiations between the two warring parties coming unstuck and the delay in the Reliance-Future deal, the lenders have decided to go ahead to recover the loan which was classified as non-performing asset (NPA) in January.
Besides the IBC exercise, the lenders are keeping the option to approach the debt recovery tribunal (DRT) using the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act or the lenders exploring Sarfaesi.
One of the key reason behind the lenders exploring Sarfesi is the time taken for resolution under the IBC process and the possibility of a big haircut on their exposures.
Their move is designed to preserve some value after Reliance Retail quietly acquired the stores that once accounted for more than 60 per cent of the Future group’s revenues. The lenders had subsequently issued a notice where it warned the public against dealing with assets of FRL. They had also pointed out that any such dealings could be subject to clawbacks under law.
It is understood that the consortium of 27 lenders will have to make a combined provision of around Rs 9,000 crore.
Among the lenders, BoI made a 47 per cent provision on this account as of December 31, 2021. The current quarter could see more lenders making such provision. This reportedly includes Chennai-based Indian Bank which has an exposure of around Rs 1,100 crore to FRL.
Some of its other lenders include Bank of Baroda, SBI, Central Bank and IDBI Bank. Last month, the lenders had even suggested to the Supreme Court that both Reliance Retail and Amazon be asked to make open competitive bids for FRL with a base price of Rs 17,000 crore.
With Reliance taking control of thee stores, the buzz has grown that it may not be prepared to stump up Rs 24,713 crore agreed in August 2020 any longer. Though a Reliance spokesperson declined to make any comments, sources close to the conglomerate said it is unlikely to alter the valuation that was agreed upon earlier, though some changes could be made to the final payout to adjust for money that FRL owes towards the purchase of inventory from Reliance Retail.
The Future group companies are now set to hold meetings of shareholders and creditors between April 20 and April 23. FRL will take shareholder approval on April 20 and its secured and unsecured creditors the following day.
The Mumbai bench of the National Company Law Tribunal (NCLT) had on February 28 given its approval to convene these meetings. The other Future group firms that will hold such meetings include Future Enterprise, Future Consumer, Future Lifestyle Fashions, Future Market Networks and Future Supply Chain Solutions.
While Amazon had filed an appeal in the top court seeking preservation of FRL’s assets, the Supreme Court had recently said that it would list for hearing “as early as possible”.
The court had pointed out that the matter was technically listed for hearing on April 1 by which time Justice Hima Kohli would resume her duties. Justice Kohli was not present in the previous hearing. The chief justice of the Supreme Court had said that if Justice Kohli was unable to make it by that time, he may constitute another bench to hear the matter.
