A day after Future Group’s proposed Rs 24,713 crore deal to sell its assets to Reliance Retail was rejected by a majority of lenders to flagship Future Retail Ltd (FRL), Reliance Industries, in a stock exchange intimation Saturday, has said that as such, the scheme of arrangement “cannot be implemented”.
On Friday, secured lenders rejected Future Retail’s deal to sell its assets to Reliance Retail Ventures Ltd, a subsidiary of RIL.
“The shareholders and unsecured creditors of FRL have voted in favour of the scheme. But the secured creditors of FRL have voted against the scheme. In view thereof, the subject scheme of arrangement cannot be implemented,” RIL said in a regulatory filing.
According to the exchange filing, in the secured creditors e-voting, 69.29 per cent of the votes of 11 lenders were against the proposal to sell the assets to the RIL subsidiary while 30.71 per cent of the votes of 34 lenders favoured the sale of assets.
However, 78.22 per cent of FRL’s unsecured creditors voted in favour of the proposal, the company said in a regulatory update. In the shareholders meeting, 85.94 per cent of the votes supported the sale of assets to RIL and 14.05 per cent of votes were against the proposal.
Future Group owns retail chains including Big Bazaar, Food Bazaar, FBB, HomeTown, Central and Brand Factory.
Some leading banks were not in favour of the proposal stating there’s ambiguity on debt recovery. “If top banks are opposing the sale to RIL, the deal is likely to fall through. The next option is to take the IBC route,” a banking source said.
Banks are now expected to move the bankruptcy court for a resolution plan. While FRL has proposed that over Rs 12,000 crore debt will be transferred to RIL, banks are not convinced about it.
In February, Reliance began taking over the rental leases of hundreds of stores once run by FRL and Future Lifestyle Fashions Ltd amid lawsuits and arbitration across India and Singapore. Banks have already questioned the RIL takeover of some of the Future stores and stated that anybody dealing in the company’s assets should keep in mind that these are subject at all times to the charge of the lenders.
US retail giant Amazon has opposed the FRL’s deal with RRVL. Amazon last week had said the meetings were “illegal” and such a step would not only breach the 2019 agreements when it made investments into FRL’s promoter firm but also violate a Singapore arbitral tribunal’s injunction on the sale of retail assets to Reliance.
FRL had rejected the Amazon’s allegations and said the meetings are “in compliance” with the directions issued by the NCLT on February 28, 2022, to consider and approve the Scheme of Arrangement filed by various entities which are part of the deal.
In a regulatory update on April 16, FRL said “the said order has been issued by the NCLT, after considering all the facts and information submitted by the parties and specific objections filed by Amazon.Com NV Investment Holdings LLC vide an intervening application and the order dated February 15, 2022 issued by Supreme Court on the same subject matter”.
The Future Group has been defaulting on repayment since last year. On April 1, Future Retail said it failed to infuse Rs 3,900 crore by way of equity in the company before the due date of March 31, 2022. Further, considering the infusion of capital, there was an obligation on the company to pay an aggregate amount of Rs 5,322.32 crore — as defined in the one-time restructuring (OTR) plan — to various consortium banks and lenders before March 31, the company said in an exchange filing.
The setback for Reliance Industries by way of banks rejecting its proposal to buy Future Retail’s assets has some similarities to the one where RIL’s deal with Reliance Communications Ltd to buy the latter’s assets was terminated with mutual consent.
In December 2017, Reliance Jio entered an agreement for the acquisition of specified assets, including spectrum, towers and other wireless infrastructure Anil Ambani-run Reliance Communications and its affiliates for around Rs 17,000 crore.
After this, Reliance Communications decided to resolve its debt at the NCLT, and the DoT threatened to reject the spectrum trading deal seeking repayment of public dues.
In March 2019, the two companies mutually terminated the asset sale deal blaming, among other reasons, lack of consent from lenders and permissions from the DoT for the fallout.
In March 2020, Reliance Communications’ lenders approved resolution plans by Delhi-based UV Asset Reconstruction Company and an RIL unit for the beleaguered company but the proposal is yet to see approval from the bankruptcy court.
In the resolution plans approved by the creditors, RIL had placed a bid of around Rs 4,700 crore for the tower and fiber assets of Reliance Infratel Ltd (RITL), while UVARCL has made an offer of Rs 14,000 crore for spectrum, real estate assets, enterprise and data center businesses, held by RCom and Reliance Telecom Ltd.