Future Group Lenders Reject Reliance's $3.4 Billion Retail Assets Deal: Report

This move by the banks have added more troubles for the company which has been struggling to pay off dues as its business was hit hard during the pandemic

The case between Future Group and Amazon is being heard at various legal forums, including the Supreme Court and also in an arbitration panel in Singapore. Image: Getty

Source : Future Retail Getty

New Delhi: Future Group’s lenders dismissed a $3.4-billion deal for its retail assets from Reliance Industries Limited (RIL), quoting sources news agency Reuters reported on Friday.

This move by the banks have added more troubles for Future Group which has been struggling to pay off dues as its business was hit hard during the 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 lenders rejected the deal when Future Group is entangled in a legal battle with US e-commerce major Amazon which has accused Rakesh Biyani-led firm of violating certain contracts by dealing with Reliance.

The case is being heard at various legal forums, including the Supreme Court in India and also in an arbitration panel in Singapore.

Amazon and Reliance both are engaged in a fierce contest to capture Indian retail market.

However, Future Group has denied any wrongdoing. The company has said that it will be pushed on the brink of bankruptcy if the deal doesn’t materialise.

In February, Reliance, which had been in the shadows through the dispute between Future and Amazon, suddenly took control of hundreds of Future stores. RIL had cited non-payment of rent by Future Group.

According to the report, this move by the Reliance had spooked bankers. The banks have already moved NCLT against Future Group to initiate debt recovery proceedings against the firm. In total, Future Group has over $4 billion in debt and lenders and bankers have started classifying the loans to Future as non-performing assets (NPA).

Banks are considered as secured creditors and they are accorded the highest priority during debt resolution. However, RIL in its 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. A bank said that this was another reason for rejecting the deal.

The sources have added that now lenders are preparing for a long-drawn legal battle in bankruptcy court which can take years to resolve.