Future Retail averts default, pays Rs 100 cr of interest on foreign bonds

Topics Future Retail | Bonds

The Kishore Biyani-led group is in stake sale talks with Reliance Industries
Future Retail, which is in talks with Reliance Industries (RIL) on sale, on Monday averted a default by paying Rs 100 crore of interest on its foreign bonds. 

Any legal complication due to default at this stage would have delayed the deal with RIL, a source said.
The interest was paid on the last day of the 30-day grace period granted by the bondholders of the $500-million senior secured notes. For this, the company drew on its internal accruals and borrowed from banks. A Future executive confirmed the bondholders were paid their dues.

Future Retail shares on Monday closed 6.62 per cent down at Rs 114. This is because one of its lenders sold the firm’s pledged shares because of default.  

Soon after the “technical” default on July 22, Future had said it would be able to make the payment within the grace period through bank funding or any other means, including selling assets.

 

 
The group was planning to sell its stake in two insurance arms but was unable to do so within the deadline.

As the group’s cash flow dried up and it started defaulting, the lenders, who have the entire promoter stake pledged with them, began negotiating the sale of Future’s retail businesses to RIL.

According to the plan, which is in the works, three Future group companies -- Future Lifestyle, Future Supply Chain Solutions, and Future Retail -- will be merged into Future Enterprises. Once it is over, RIL may invest Rs 8,500 crore in the merged entity, taking a 50 per cent stake in the merged outfit.

A source on Monday said Future vendors had been asked by RIL to take a haircut of 20 per cent on their pending dues. Lenders to Future Group are also being asked to take a haircut of up to 40 per cent. 

Banks, however, are likely get Future Group’s real estate, which will be hived off into a company.

 

 
Even as Future Group had high debt for long, both at the level of the promoters and listed entities, the pandemic made things worse. It disrupted the operations of group companies, leading to severe challenges in sourcing, manpower, supply chains, and distribution. Several stores, including franchisees/retail outlets, were closed on account of lockdown.

Apart from company debt, the promoters' debt rose from Rs 11,790 crore in March 2018 to Rs 11,970 crore in March 2019, despite monetisation.

The group further raised Rs 4,620 crore between April and December 2019 through a mix of debt, equity, and stake sales. Blackstone invested Rs 1,750 crore and Amazon Rs 1,430 crore.

Of the proceeds, Rs 1,440 crore was ploughed back into Future Retail, but it did not help matters.


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