Future Retail misses ₹3,495 crore repayment, ratings downgraded to default
Premium- Care Ratings has downgraded Future Retail’s non-convertible debentures, long-term bank facilities and short-term bank facilities to Care D
MUMBAI : Future Retail has defaulted on its first repayment obligation of ₹3,494.56 crore due on or before 31 December following the one-time debt recast and was therefore downgraded to default grade by Care Ratings, it said in two separate regulatory filings.
Care Ratings has downgraded Future Retail’s non-convertible debentures, long-term bank facilities and short-term bank facilities to default grade (Care D).
“We refer to the obligation on the company to pay an aggregate amount of ₹3,494.56 crore as defined in the one-time restructuring (OTR) plan to various consortium banks and lenders, who are parties to the agreement under OTR plan, on or before 31 December 2021," it said.
Future Retail’s 19-month moratorium ended on 30 September. Its lenders include Union Bank of India, Bank of India, Bank of Baroda, State Bank of India, Indian Bank, Central Bank, Axis Bank and IDBI Bank. According to data from Care Ratings, Future Retail owes banks ₹6,278 crore.
The company said that due to ongoing litigation with Amazon.com NV Investment Holdings LLC, the company was not able to complete the planned monetization of the specified business as contemplated in one-time restructuring (OTR) plan to repay lenders on due date.
“As discussed with the lenders, the company would be co-operating for completing the monetization of the specified business within next 30 days as per directions of the banks to resolve the current situation," it said.
Under the Reserve Bank of India’s (RBI's) 6 August debt recast framework, Future Retail has a review period of 30 days from the due date to repay lenders. If it is still in default with any lender at the end of this review period, it will be classified non-performing. In that case, provisions would have to be made as if the recast never occurred, forcing banks to classify the account as “doubtful", requiring at least 25% provisions subsequently.
Under RBI rules, banks must classify NPAs into three buckets—substandard, doubtful and loss asset—depending on the duration of default. As bad loans remain on a bank’s books for longer, the chances of them being recovered also diminish.
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“The company shall intimate the further development and updates in this connection as and when applicable," it said.
Last August, Reliance Retail Ventures Ltd (RRVL), a unit of Reliance Industries Ltd, agreed to buy Future Group’s retail assets on a slump sale basis for ₹24,713 crore. The cash-strapped Future Group is trying to expedite the deal with Reliance to pay creditors and save the Big Bazaar retail chain from a possible collapse.
Mint reported on 25 December that lenders are hopeful that the recent Competition Commission of India’s (CCI’s) ruling suspending Amazon’s 2019 deal with Future Coupons Ltd, a group unit, would pave the way for Future Retail’s deal with Reliance Retail. On 17 December, the competition watchdog kept Amazon’s purchase of a 49% stake in Future Coupons in abeyance and ordered a penalty of ₹202 crore for allegedly not being upfront about the actual scope and purpose of the deal.
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