Future-counting deal: Lenders say they are fighting to repay $ 2.5 billion in loans

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Future Group’s creditors are exploring options to repay more than $ 2.5 billion (approximately Rs 18,180) in loans amid worries that the planned sale of assets to Indian retailer Reliance Industries could fail, four said. bankers with knowledge of the subject.

Future can liquidation of the person if a deal that is already mired in litigation falls and banks are actively discussing an alternative one-time restructuring option, which could include an easier repayment period and a new capital injection, people said on condition of anonymity because the negotiations are private. .

“Without Reading, there is no future for the future, “said one of the bankers of a major government lender.

Over the past week, bankers have discussed a restructuring plan and are drawing up a plan, sources said.

The largest financial lenders of the future include India’s largest state-owned bank, India, along with smaller rivals Bank of Baroda and Bank of India.

The three banks, Future Group and Reliance, did not immediately respond to requests for comment.

The future, India’s No. 2 retailer with more than 1,700 stores, was hit hard by the pandemic and agreed to sell most of its assets to Mukesh Ambani-Led Reliance in a deal for $ 3.4 billion (or Rs 24,700).

However, the deal faces legal hurdles for the e-commerce giant Amazon alleging that Future, by agreeing to sell assets to Reliance, violates the terms of a transaction that the US company entered into with a legal entity of the Future Group.

The future denies any violations.

The deal was temporarily blocked by a court in New Delhi, but the order was subsequently overturned. Amazon has now taken the matter to the Supreme Court of India.

The Future-Reliance deal will help creditors recover up to 80 percent of their installments, the four bankers estimate.

The troubled retailer’s debt of more than $ 2.5 billion (approximately 18,180 kroner) includes loans from banks and money owed to operating creditors.

“Dark Scenario”

The future, which last year benefited from a moratorium on loans amid the pandemic, has since failed to meet its obligations, sources said.

The defaults, combined with the legal battle, are now forcing banks to seriously consider a one-off restructuring plan under an agreement between creditors signed last year, they added.

“Although the restructuring plan was discussed in the 3-4 meetings we had, we didn’t think much about it because it was always plan B. Now that the Reliance deal is over, we have to take it seriously,” a second banker said.

Although the restructuring plan is still being improved, it may include providing easier options for paying Future, including a moratorium for several quarters, bankers said.

Banks may also consider converting debt into equity, two bankers said.

However, the plan under discussion will need Future to bring a “significant” amount of capital to the table and will need lenders to pump out new funds, the two bankers added.

“One looks at a very bleak scenario because there is no cash flow in Future,” said the first banker, adding that lenders are cautious about investing more money in the merchant.

© Thomson Reuters 2021

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