Future Retail Ltd is a step closer to a debt recast, with a group of 28 lenders approving a proposal for this and allowing it to extend the loan repayment period by up to two years, subject to the approval by a central bank committee, the company said.
“The said resolution plan, which remains subject to the approval of the expert committee under the chairmanship of K.V. Kamath, constituted by the Reserve Bank of India (RBI), has been approved by the lenders to the existing debt of the company,” the company said in a late evening statement to the stock exchanges on Saturday.
Future Retail’s board has also approved the plan, the company said.
Future Retail’s lenders include Union Bank of India, Bank of India, Bank of Baroda, State Bank of India, Indian Bank, Central Bank, Axis Bank and IDBI Bank, among others.
The company owes banks ₹6,278 crore, showed data from CARE Ratings.
On an aggregate basis, Future Group owes around $3 billion in loans and lenders are trying to figure out a way to ensure the least possible hit on asset quality. The group also owes mutual funds that had invested in securities sold by group entities, including Rivaaz Trade Ventures, NuFuture Digital India and Future Ideas Co. For Indian banks, with bad loans of ₹7.38 trillion, a soured asset of that size will only make matters worse.
The company opted to restructure loans under the RBI’s 6 August circular as the pandemic impacted long-term business viability and led to significant financial stress across industries, it said. The debt burden, it said, has become disproportionate relative to the cash flow generated by the company because of the multiple lockdowns since the coronavirus outbreak.
Covid-19 has made a comeback now as have state-specific lockdowns and restrictions, threatening to dislodge emerging signs of recovery. Bankers are downplaying the impact of the second wave but are concerned that curbs will hurt the movement of goods and services, affecting repayment capabilities.
Other features of the recast include an interest moratorium between 1 March 2020 and 30 September 2021. Interest during this period will be converted into funded interest term loan (FITL), payable by December 2021. FITL is a fresh loan that helps stressed borrowers repay existing interest over time and is used in most deep recasts. All penal interest and charges, default premiums, processing fees unpaid since March 2020 till implementation will be fully waived off.
The deadline to implement this scheme is 26 April, the company said.
Debt raised through non-convertible debentures (NCDs) issued by Future Retail will also come under the recast scheme and the company has received written consent from all bondholders, it said. Under the resolution plan, redemption of three separate NCD series will be rescheduled between FY23 and FY26, without any change in interest rate. Vistra ITCL (India) Ltd and CentBank Financial Services Ltd are debenture trustees to these bonds.
“It may be noted that 5.6% US senior secured notes 2025 issued by the company and non-convertible debentures issued by the company to certain trusts are not part of the resolution plan,” it said.
Reliance Retail Ventures had last August entered into an arrangement to buy Future Group’s retail assets on a slump sale basis. However, the deal is stuck in a legal quagmire with e-commerce behemoth Amazon contesting the sale. The issue is pending before the Supreme Court and is scheduled to be heard on 27 April. Mint reported on 12 April that lenders to Future Retail are hopeful of approving a debt recast plan by the end of this month, with the final draft being circulated among bankers for approval. Livemint