Future lenders in trouble over collections

Bombay : Future Group lenders agreed on Sunday to suspend the sale of Future Retail Ltd (FRL) small-format stores until the Supreme Court delivers its verdict in a case between Amazon.com Inc. and the founders of Future Group regarding the latter’s sale of assets to Reliance Industries Ltd, said two people familiar with the discussions.

FRL lead banks including Bank of India, State Bank of India and Barclays held an emergency meeting on Sunday and decided to seek legal advice on the asset sale plan before proceeding with any valuation process for the assets of FRL’s small format stores such as Easyday Club and Heritage Fresh,” one of the two people said, speaking on condition of anonymity.

Future, Amazon and spokespersons for SBI, Bank of India and Barclays did not respond to emails sent by Mint.

The founders of FRL, which missed a payment to its lenders, need money from a A 24,713 crore deal has been reached with Mukesh Ambani’s Reliance Industries Ltd to repay the banks. However, a Singapore arbitration court blocked the sale over Amazon’s claim that a 2019 transaction with the founders of Future Group prohibited FRL from selling its assets to entities, including Reliance Industries, without the giant’s consent. of e-commerce. The Supreme Court hears the case.

At the emergency meeting, FRL lenders discussed the one-time restructuring, under which only chattels and fixtures (laptop inventory, cameras, etc.) from small stores can be auctioned if the banks decide to assert their recovery rights following the FRL decision 3,500 crore default repayment.

“The problem is that these items won’t bring in enough money to cover even one loan payment,” the person said. “The second issue is that the Singapore court order prevents Future Group from taking any action to dispose of any part of FRL’s assets without the prior consent of Amazon or court orders. And now the Supreme Court has not only ruled that the court had the power to make an order in this case, but also agreed to allow Amazon’s motion against the order of the Delhi High Court, which stayed the proceedings of the arbitral tribunal” .

The hearing in the case is scheduled for February 23.

“This means that the assets of the FRL are subject to the injunction at this time, and the issue of the sale of the assets of the FRL by lenders or any other entity is pending pending judgment from the SC,” said the first person.

This means there is a good chance that the Singapore International Arbitration Center will resume its hearing on the matter, and if an asset sale process is launched now by the lenders, its implementation will depend on the final verdict. of the SIAC or any subsequent judgment of an Indian court, depending on the two persons.

“That’s why the banks’ asset sales committee is in a dilemma. On the one hand, if the FRL loan is classified as a non-performing asset (NPA), it may end up in insolvency court and, on the other hand, if the loans are not to be classified as NPA, the restructuring plan must be implemented, which can be legally complicated in the context of pending court verdicts. Lenders want to avoid getting into a legal battle because they don’t know if the decision to take over FRL’s assets will be legitimate. That’s why they decided to seek a legal opinion on the proposed sale of assets,” the first person said.

This means that the proposed sale of Kishore Biyani’s small store formats is unlikely to be carried out by the FRL lenders, at least until the higher court issues its final verdict and, therefore, the lenders could be required to find a new way to keep FRL assets out of the way. to be classified as NPA so that the company does not end up in insolvency court, the first person said.

Since the consultant Alvarez and Marshal and SBI Capital Markets are acting on behalf of the lenders for the RIL-Future scheme of arrangement, it was decided by the lenders to give SBI Caps the additional scope of the sale transaction of the FRL’s small format business, the people quoted above said.

But now the FRL lenders will keep the asset sale proposal on hold and act only on the advice of legal counsel, to be appointed by the asset sale committee, the first person said.

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