Future Retail lenders poised to take control of the company’s cash flow

Lenders to Future Retail (FRL) are preparing to take control of the company’s cash flow following a ₹3,494 crore default by the Kishore Biyani-promoted hypermarket last month, said two people familiar with the case. While the lenders are unanimous on this step, differences have emerged between them on a debt restructuring proposal, with some private and foreign lenders refusing to commit to a new loan restructuring proposal.

The development comes at a time when Future Group is embroiled in a year-long legal battle with e-commerce giant Amazon over an alleged breach of shareholder agreement, which in turn has delayed the execution of an agreement by 24 ₹713 crore to sell majority of his business to Reliance Industries-related businesses.

Future Retail is likely to open a Trust and Retention Account (TRA) with Bank of India this week which will capture revenue from the business, the people said. Similarly, all payments – to vendors, employees or overhead – will be routed through this TRA account.

FRL lenders discussed options

This will give lenders direct access to the company’s cash flow, the people said.

Additionally, 5% of the revenue Future Retail collects will be withheld by the lenders, one of the people said. This will be raised in the coming weeks if banks decide to take over the business, he added.

Future Retail’s total revenue was ₹2,346 crore for the quarter ended September 30, 2021, which is the highest in five quarters, according to a stock disclosure. The company has yet to report results for the quarter ended December 2021.

  • Future Retail has Rs 13,800 cr in outstanding loans
  • Lenders classified account as NPA after failed OTR
  • Future Retail is expected to open a trust and retention account with Bank of India this week
  • 5% of the revenue Future Retail collects will be withheld by the lenders
  • This will be increased in the coming weeks if the banks decide to take over the company
  • Future Retail proposes a debt overhaul as part of the circular of June 7, 2019
  • Some private and foreign banks are not in favor of another debt overhaul

“In effect, the lenders are ordering Future Retail to control expenses since they will keep 5% of the revenue,” the first person said.

Future Retail, the flagship company of Future Group, has outstanding loans of ₹13,800 crore from 27 lenders.

Last week, lenders discussed various options to recover their debt, including the company’s proposal to recast loans in accordance with the June 7, 2019 RBI circular. Lenders are divided on whether Future should have a second chance.

The first debt overhaul was signed in April 2021 under the Reserve Bank of India’s One-Time Restructuring (OTR) program designed for businesses affected by Covid-19.


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