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Banks  worry as Future Group asset sale stalls

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MUMBAI: Lenders to Future Group are assessing the Kishore Biyani-led group’s ability to sustain operations after a loan moratorium ends in September, two people directly conscious of the matter said.

The lenders are alarmed by Future Group’s delay in divesting any non-core assets, an important part of the loan restructuring process aimed toward shoring its capital base, the people said, requesting anonymity.

Burdened with debt, Biyani chose to sell the cash-strapped group’s assets to Mukesh Ambani’s Reliance Industries Ltd for ₹24,713 crores in August last year. The asset sales were expected to shop for the cash-strapped group crucial time until Reliance could complete the takeover.

However, the move angered existing investor Amazon.com Inc., which initiated legal proceedings, stalling the acquisition by billionaire Ambani.

“The ability of a recent debt recast to rescue Future Retail now solely depends on the company’s ability to sell assets and infuse funds whilst they await a takeover by Reliance Industries grows longer,” said a senior banker, one among the 2 people cited above. “While Reliance Industries has been supporting Future’s operations, the corporate still has got to meet the asset-sale commitments made as a part of the recast deal. as an examplethe corporate planned to sell its insurance business to boost funds, but that has not happened yet.”

The acquisition of Future Group by Reliance Industries is that the only answerwithin the end of the day, said the person, also a senior banker.

“We are reviewing all accounts recast under the one-time restructuring window, including Future Retail. As of now, they need not be ready to sell some assets but are in discussions with investors,” the person added.

According to the debt recast approved by the lenders, a moratorium would be effective till September. The interest accrued during the moratorium is going to be converted into a term loan, payable by December.

The arrangement is aimed toward helping the stressed borrower repay existing interest over time.

That apart, all penal interest and charges, default premiums, processing fees unpaid from March 2020 till the implementation are going to be fully waived.

Bankers said that while Future Group still has a while left before the moratorium ends, it must act fast.

Experts acknowledged that there’s an opportunity that Reliance Industries will renegotiate the longer-term Group deal, given the erosion useful within the group’s business.

“The value impairment of Future Retail might be significant if the business has performed badly within the past year. So, i might not be surprised if Reliance Industries renegotiates the worth,” said Arvind Singhal, chairman, and director of Technopak Advisors.

Meanwhile, a politician related to the recast process said that the business has improved during the second wave from an operational standpoint.

Also, Reliance Industries has been working as a vendor for Future, supporting its operations, the official said.

Spokespeople for Future Group and Union Bank of India, the lead lender, didn’t answer emails sent on Tuesday.

While the first deadline of the deal was March, it had been extended to September due to the legal battle with Amazon.

Amazon had objected to the longer-term Group’s sale to Reliance Industries, citing a violation of its investment agreement that barred Future Retail from selling its assets to other entities.

In October last year, the Singapore International Arbitration Centre (SIAC) passed an interim order barring Future Retail from taking any steps to sell or encumber its assets.

SIAC will now hear the case between Amazon and Future Group on 12 July.

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