Future - Reliance Deal Rejected By Secured Creditors
The meeting was convened after NCLT allowed the retailer to seek the approval for the scheme of arrangement.
Secured creditors of three flagship Future Group companies, Future Retail Ltd., Future Lifestyle Fashions Ltd. and Future Enterprises Ltd., have rejected outright a reorganisation scheme that would have paved the way for a mega deal with Mukesh Ambani-led Reliance Retail Ventures Ltd. This points to deal failure, though voting disclosures of other group companies are awaited.
Each of these companies asked their creditors and shareholders to approve a composite scheme of arrangement that would consolidate Future Group's retail assets and merge them with the retail business of Reliance Industries Ltd.
As per company law, such a scheme proposal requires at least 75% votes by value, of creditors and shareholders, to pass.
At all three companies, the proposal failed to get the requisite majority of votes of secured creditors, though unsecured creditors and shareholders approved the transaction.
Future Retail
Secured Creditors: 69.29% Against
Unsecured Creditors: 21.78% Against
Shareholders: 14% Against
According to the details provided in the vote summary, secured creditors representing Rs 6,860 crore worth of debt voted against the proposal, while those in favour had outstanding debt worth Rs 3,040 crore.
Among unsecured creditors, those against the scheme had debt worth Rs 1,146 crore, while those who voted in favour of the proposal had outstanding debt worth Rs 4,117 crore.
Future Lifestyle Fashions
Secured Creditors: 82.75% Against
Unsecured Creditors: 6.07% Against
Shareholders: 18% Against
Even in case of Future Lifestyle Fashions, secured creditors representing Rs 1,378 crore of outstanding loans voted against the deal, whereas those in favour have made loans worth Rs 287 crore.
Among unsecured creditors, those representing Rs 83 crore in loans voted against the transaction and those with Rs 1,293 crore in loans voted in favour.
Future Enterprises
Secured Creditors: 99.97% Against
Unsecured Creditors: 37.34% Against
Shareholders: 0% Against
The vote data shows, secured creditors that voted against the deal had loans of Rs 4,292 crore and those who voted in favour had loans of Rs 1 crore.
Among unsecured creditors, those against had loans of Rs 268 crore while those in favour had Rs 449 crore in loans to the company.
Other Future Group companies have yet to disclose the voting outcomes, but these three companies shouldered the bulk of the group's debt.
BloombergQuint had reported on Thursday that three major lenders, including State Bank of India, Bank of India and Union Bank of India had rejected the sale of retail assets of Future Group to Reliance Retail Ventures Ltd. And that other lenders were likely to have followed suit.
In a separate statement to exchanges on Saturday, Reliance Industries said that the scheme of arrangement cannot be implemented owing to the voting results.
"As per these results, the shareholders and unsecured creditors of FRL (Future Retail) have voted in favour of the scheme. But the secured creditors of FRL have voted against the scheme. In view thereof, the subject scheme of arrangement cannot be implemented," Reliance Industries said.
In September last year, the National Company Law Tribunal had allowed Future Retail and other group companies to convene meetings of shareholders and creditors to vote on consolidation of group entities.
The meetings were to seek approval for the scheme of arrangement between 20 Future Group companies, including six listed, with Reliance Retail Ventures Ltd., and Reliance Retail and Fashion Lifestyle Ltd. This would mean Reliance Retail would purchase the retail and logistics businesses of Future Group for around Rs 25,000 crore, which was first announced in August 2020.
But the deal has been delayed on account of legal challenges by Amazon.com NV Investment Holdings LLC, an investor in a Future Group entity.
Over this period, Future Group’s debt piled up, with viability of its operations coming under question. A one-time restructuring scheme, implemented last year failed because Future Group companies were not able to meet repayment milestones. Lenders have since moved to classify Future Retail as a non-performing asset.
Meanwhile, in February this year, Reliance Retail took control of 200 Big Bazaar stores after the Future Group defaulted on payment for renewing the lease. In March, Future Retail said it has received termination notices from Reliance in relation to another 835 sub-leased properties—342 large format stores, including Big Bazaar, Fashion@Big Bazaar, and 493 small format stores such as Easy Day and Heritage stores.
Future Lifestyle also received termination notices on 112 sub-leased properties from Reliance Retail due to pending dues. That included 34 Central stores and 78 Brand Factory outlets.
Effectively, Reliance Retail already has control over the bulk of Future Group's retail outlets despite the deal facing a certain death.