Future Retail lenders okay debt recast plan with repayment up to two years

Photo: Shutterstock
Lenders to Future Retail have approved a debt recast plan wherein the company can extend the repayment of loans for up to a period of two years. This follows the approval of debt recast plan by the K V Kamath committee, set up by the RBI to recommend parameters for one-time restructuring of corporate loans.

The resolution plan approved by the lenders and the board of directors of Future Retail will be executed by April 26.

A group of 28 lenders, including Union Bank of India, Bank of India, State Bank of India, Bank of Baroda, Axis Bank and HDFC Bank, has decided to extend the repayment period of short term loans, term loans, NCDs, overdue working capital loans (converted into Working Capital Term Loans) of the company. Furthermore, as per the debt recast plan approved by the lenders, interest during the period March 1, 2020, and September 30, 2020, will be converted into Funded Interest Term Loan (FITL) which shall be payable by December 2021.

Also, cash credit will be continued to the company but at a reduced level based on the assessment by banks, and all penal interest and charges, default premiums, processing fees unpaid since March 2020 to the implementation date of the resolution plan will be waived off fully.

Furthermore, as a part of the resolution plan, debt raised through NCDs are also part of the restructuring process and the company has taken consent from all the NCD holders to amend the terms and conditions of the NCDs as per the resolution plan approved by the lenders.

In an exchange notification, the company said, the pandemic has deeply impacted its long-term business viability and led to significant financial stress across the industries. “The debt burden has become disproportionate relative to the cash flow generated by the company owing to the multiple lockdowns since the pandemic surfaced, posing significant financial stability risks to the business. Hence, the restructuring of the debt is crucial and essential”, it said.

According to rating agency Care Ratings, as of October 2020, Future Retail had loans worth Rs 6,278 crore, including long-term term loans of Rs 528 crore, long-term fund-based bank facilities of Rs 3,250 crore, and short-term non-fund based bank facilities of Rs 2,500 crore.

In August last year, Future Group had announced that it will sell its retail and wholesale business to Reliance Retail Ventures for Rs 24,713 crore. However, the deal has not gone through as Amazon has contested the scheme of arrangements of the deal. E-commerce giant Amazon had invested in Future Coupons in August 2019.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel