Future Group’s bankers have turned down a $3.4 billion sale of the Indian company’s retail operations to Reliance Industries, according to banking sources, adding to the company’s debt problems following the COVID-19 outbreak.
“All secured lenders have voted against Reliance’s scheme of the arrangement,” a top executive at a state-owned lender stated. “Initially, we believed that any other alternative approaches would result in smaller recovery,” the source said. “However, it (Future) has become mired in legal challenges, and we are now dubious of the value left in it.”
The lenders’ denial comes amid a legal challenge by Amazon.com Inc, which has accused Future of breaching contracts by engaging with Reliance Industries, which is run by India’s richest man, Mukesh Ambani. Future has denied any wrongdoing and stated that if the purchase falls through, it will be forced into bankruptcy. The dispute is being heard in a number of legal contexts, including a Singapore arbitration panel.
However, in February, after absorbing many of the leases held by cash-strapped Future, Reliance, which had remained on the sidelines earlier in the dispute, abruptly took control of hundreds of Future outlets, citing non-payment of rent. This alarmed bankers, who have already begun debt collection proceedings against Future.
Future Group is in $4 billion debt
The Future Group owes almost $4 billion in debt, and lenders have begun classifying the debts as non-performing assets (NPA). During debt resolution, banks that are secured creditors are usually given top priority. In this case, however, reliance on regulatory filings has assured bondholders of complete recovery, which has caused lenders to be concerned.
“The bondholders are getting preferential treatment, which is not something the bankers like,” said another banker, adding that this was another reason for the deal’s rejection.
On Friday, the yield on Future Group Retail’s bond due in January 2025 reached a new high of 88.906 percent, up from a close of 37.680 percent on Wednesday. Lenders are preparing for a protracted struggle in bankruptcy court, which may take years to resolve, according to sources. Requests for comment from Future and Reliance were not returned.