future group: Future Enterprises lenders to go to bankruptcy court for dues collection

The lenders will soon begin insolvency proceedings against Future Enterprises, the hub company of Future Group, which manufactures, designs, buys and distributes fashion apparel for the group’s companies, two people with knowledge of the development said.

The collapse of the Rs 24,712 crore deal with Reliance Industries and defaults on a series of payments to lenders in the last week of March under the terms of the One-Time Restructuring (OTR) prompted the lenders to pursue insolvency proceedings, the people said.

The company has an outstanding debt of Rs 6,880 crore as of January 31, 2022. The Central Bank of India, the lead bank, will solicit technical and financial bids from resolution professionals for FEL next week.

FEL did not immediately respond to ET’s request for comment.

According to information from the exchange, FEL defaulted on payments of Rs 2,911.5 crore to lenders between March 23 and March 31.

ET reported today (April 25) that lenders will prefer a holistic approach since their businesses are interdependent. The outstanding loans of the 20 group companies involved in the Reliance deal (which was canceled last week) stood at Rs 28,921 crore as of January 31.

Bank of India has already filed for insolvency proceedings against Future Retail Ltd (FRL) in the National Company Law Court, Mumbai after it defaulted on OTR payment of Rs 3495 crore in the last week of January.

“Lenders will file for group insolvency after referring individual (defaulting) businesses to insolvency,” one lender said. “It reduces administrative work and attracts buyers,” he added.

NCLT approved group insolvency for Videocon Industries and sister companies Srei.

The lenders have selected Vijaykumar Iyer, backed by Deloitte India, as interim resolution professional for FRL.

Although NCLT must admit a business within 14 days of being referred under the Insolvency and Bankruptcy Code (IBC), the process generally takes at least three months.

Reliance and Future has officially canceled the Rs 24,713 crore deal announced in August 2020 after 69% of secured lenders voted against the plan while 86% of shareholders and 78% of unsecured creditors favored the scheme.

Secured lenders voted against the sale of assets to Reliance because they received no guarantee from Future Group that the buyer would support the proposed distribution plan. Future had offered to transfer around 45% of the proceeds – amounting to Rs 12,612 crore – to Reliance as it repays the remaining loans over seven years.

However, the recovery under the bankruptcy path could be even lower at less than 10% because the value of the assets is much lower than the debt of the future.

The turning point in the deal was the takeover of the 946 Future store lease by Reliance Industries in late February, the lender said above. Reliance claimed to have terminated the rental agreement after Future failed to pay the rents. A large network of stores across India was the main attraction for Amazon and Reliance to acquire Future.

A 20-month legal battle between Future Group and Amazon has delayed the sale of the assets of the Reliance Group companies. Amazon had challenged the asset sale, alleging that its agreement with Future Coupon in 2019 prohibited the sale of assets to Reliance entities.

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