Banks cite legal issues which make the proposed transaction to cause erosion of asset value
Banks cite legal issues which make the proposed transaction to cause erosion of asset value
Lenders of Future Group have rejected a $3.4 billion sale of Indian conglomerate retail assets to Reliance Industries, banking sources said, linking Future’s struggle to repay debt after it was hit by the COVID-19 pandemic. Went.
“All secured lenders have voted against the arrangement plan put in place by Reliance,” said a senior executive of a state-owned lender.
“Initially we thought that any other alternative method would lead to lower recovery, but since then it has been embroiled in (future) 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 US e-commerce giant Amazon.com Inc, which has accused Future of breaching certain contracts with Reliance, run by India’s richest man Mukesh Ambani.
Future has denied any wrongdoing and said it would be pushed to bankruptcy if the deal fell through. The matter is being heard in various legal forums including an arbitration panel in Singapore.
But in February Reliance, which had earlier shrugged off the controversy, abruptly took over hundreds of Future stores, citing non-payment of rent, after handling several leases held by cash-strapped Future.
This scared bankers, some of whom have already initiated debt recovery proceedings against Future.
Future Group has total debt of more than $4 billion and lenders have started classifying loans as non-performing assets (NPAs).
Generally, banks which are secured creditors are given top priority during loan resolution. However, in this case, Reliance has assured full recovery to bondholders in a regulatory filing, raising concerns of lenders.
Another banker said, “Preference is being given to the bond holders and this is not something which is pleasant for the bankers.”
Future Retail’s January 2025 bond yield hit a record high of 88.906% on Friday, compared to 37.680% on Wednesday.
Sources said lenders are gearing up for a protracted battle in bankruptcy court, which may take years to resolve.
Future and Reliance did not respond to requests for comment.