Future Group Approaches Lenders For One-Time Debt Recast: Exclusive
The Kishore Biyani-led Future Group has approached lenders, led by State Bank of India and Bank of India, to restructure its outstanding debt under the Reserve Bank of India’s one-time restructuring scheme, permitted by the regulator to help companies tide over the Covid-19 crisis.
Future Group is looking to defer repayments on Rs 7,500 crore in debt over the next few months under the scheme, within which time the group expects to close the sale process of its logistics, retail and warehouse assets to Reliance Industries Ltd., said two bankers with direct information of the restructuring proposal. They prefer to remain unidentified.
SBI, Bank of India and other lenders are currently assessing the viability of the restructuring plan, the two bankers said. According to the RBI’s scheme, banks are allowed to defer repayments by up to two years. The restructuring needs to be approved latest by December 2020 and implemented within 90 days.
The deferral of repayments will help the company save on interest costs till its sale process with Reliance Retail Ventures Ltd., the retail arm of Reliance Industries, is completed, the first of the two bankers said. At present, the domestic lenders to Future Group have stalled fresh lending, the first banker said.
In April, BloombergQuint had first reported that Future Group is looking to restructure its debt owing to the Covid-19 pandemic.
Emails sent to the Future Group, SBI and Bank of India on Friday went unanswered.
On Oct. 14, Biyani, while speaking at the Phygital Retail Convention, said the group had lost revenue worth Rs 7,000 crore in three to four months since the pandemic's outbreak. The nationwide lockdown had forced businesses to shut stores. The large losses incurred had led to the sale of the group’s retail businesses to Reliance, Biyani said. There was no way the company could have survived losing such an amount, he said, adding the problem is rent doesn't stop, interest (on debt) doesn't stop.
Given the size of the group’s outstanding debt, a restructuring plan, if approved, will also need to be reviewed by an RBI-mandated expert panel led by veteran banker KV Kamath.
The Kamath committee has specified sectoral benchmarks which lenders need to follow before assessing a resolution plan. But it has not suggested any specific benchmarks for the retail sector.
A few Future Group entities have already reported defaults on debt securities. On Sept. 8, Future Consumers Ltd. delayed payment of Rs 22 crore to bondholders. The company informed stock exchanges that it has proposed to debenture holders that it will be making half of the repayments by Sept. 30 and the rest by Dec. 31. Later, on Oct. 1, the company told the bourses that it has not been able to repay the dues since its debenture holders did not accept the proposal and therefore it continues to be in default.
Before that, other Biyani-owned entities, Rivaaz Trade Ventures Ltd., Nufuture Digital (India) Ltd. and Future Ideas Ltd. have all reported defaults on non-convertible debentures repayments.
Future Group is currently in the process of finalising a sale process with Mukesh Ambani-owned Reliance Retail Ltd. The Rs 27,000-crore deal, announced in September, will include a sale of Future Group’s retail, wholesale, logistics and warehousing businesses to Reliance Retail.
The deal is facing opposition from Amazon.com Inc., which has said its consent was not sought before it was approved by Future Group. Since it owns 49% stake in Future Coupons Ltd., Amazon’s consent is essential, it has claimed in arbitration proceedings initiated at the Singapore International Arbitration Centre.