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

Interest accrued between March 1, 2020, and September 30, 2020, will be converted into Funded Interest Term Loan, payable by December 2021

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.