Lenders appeal to buyers for Future’s debt-laden assets

Bombay : The lenders of the indebted Future group are in talks with at least five entities, including a unit of the Edelweiss group, to auction the assets of the group’s flagship, Future Retail Ltd, for more than 5,000 crore, said two people with knowledge of the matter.

The talks, if successful, will give buyers access to the assets of Future Retail’s Big Bazaar stores which are now under the control of Reliance Industries, the people quoted above said, seeking anonymity. Assets include store fixtures, store infrastructure, merchandise and inventory.

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A file photo of people walking past a closed Future Retail Big Bazaar outlet in Mumbai. (Photo: Reuters)

The deal will potentially pave the way for Reliance Industries to restart retail operations at the approximately 950 Big Bazaar stores under its control, as the load on assets inside the stores will be removed. In addition, lenders will be able to recover a substantial part of their due.

A spokesperson for the Edelweiss Group declined to comment. An email sent to a Reliance spokesperson on Sunday went unanswered. Similarly, emails sent to spokespersons for Future Group lenders went unanswered.

Future Retail, which owes almost 12,000 crore to its roughly 28 lenders, loan defaults and the outlook for bank takeovers look bleak, with Reliance Industries taking over Big Bazaar stores across the country, straining Future Retail’s cash flow.

In March, Reliance became the sub-lessor of more than 950 Future Retail Big Bazaar stores and took control of the space inside them.

Reliance, however, has been unable to restart retail operations at these stores because Future Retail’s lenders have the right of first charge on collateral, which includes inventory, fixtures, billing systems , shelves and other essential items belonging to or to be used in these outlets.

Future Group claimed it had no prior knowledge of Reliance’s decision and denied collusion charges.

Mint announced on March 21 that Future Retail’s lenders have decided to initiate collection proceedings through the debt collection court. The change in stance comes after Future claimed it was unaware of the takeover, and the banks believe suing the company now will create further complications. Mint had reported quoting bankers aware that Future group lenders have all the procedures ready and can also choose to refer it to an insolvency court instead, but not all banks agreed to this because bankruptcy rules impose an immediate moratorium, which could lead to further erosion of the value of Future Group’s assets.

Bank of Baroda has been instructed to file the case under the Securitization and Reconstruction of Financial Assets and Enforcement of Securities (Sarfaesi) Act with the Debt Recovery Court.

Loans to Future Retail were classified as non-performing in January after the company failed to repay.

On March 16, Future Retail told exchanges that it had seen a massive erosion in sales and a complete erosion in its net worth due to mounting losses. The company said its proposed agreement with Reliance not only ensures business continuity, but also a significant refund of dues to lenders. Future Retail said its tight cash flow had led to a backlog of unpaid assessments to sellers and lessors, which is why it continued to remain in default, with many lessors issuing termination notices for eviction from properties.

However, since the proposal The 24,713 crore asset sale agreement between Future and Reliance is currently in litigation in the Supreme Court, and the Singapore International Arbitration Center has restricted the transfer or sale of any of the sale assets to the retail from Future Retail to Reliance, the latter cannot directly buy or take over the retail assets of Future Retail, owner of the consumer brand Big Bazaar.

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