Lenders open to FRL resolution under June 2019 rules, subject to SC ruling

Lenders to troubled retail chain Future Retail Ltd (FRL) could consider any restructuring proposal from the company management under prudential framework for resolution of stressed assets put in place in June 2019 by Reserve Bank of India. This is subject to proceedings in the Supreme Court where the company sought 10 days’ time to work out a settlement.

Such an option (resolution under June 2019 norms) could make room for a six-month resolution and create prospects of upgrading the account based on performance.

A senior banker said the FRL case was recast under a regulatory package put in place in 2020 by the RBI to support those affected by Covid-19 (first wave). At present, the provisions of the June 7, 2019 circular are not applicable to attempt some different approach to resolution in this account.

For lenders to look at this option, the company has to come up with plan detailing resolution steps. Ofcourse, this option comes with conditions, he said.

Another senior with a public sector bank alluded to the option to consider FRL case under June 07, 2019 resolution framework. Lenders have done their part of the job like restructuring and treat it as a non-performing asset and begin making provisions.

Lenders can look at that provided company management comes up with a proposal. That would give six months to fashion workout and implement a plan.

Under this route, lenders would have to ink inter-creditor agreement, get resolution plans vetted from rating agencies for viability and a forensic audit, pointed out by an official with a private sector lender.

Kishore Biyani-promoted Future Retail failed to make the principal payments due on its restructured domestic bank borrowings on December 31, 2021. The 30-day review period (grace period to pay) allowed by central bank has ended.

A principal repayment of about Rs 3,500 crore was due on December 31, 2021, on the company's bank borrowings as part of a one-time restructuring plan implemented by the onshore lenders in April 2021. The company was allowed a review period of 30 days to cure the default. Future Retail is an India-based retailer with about 1,388 stores across more than 400 cities.

On Thursday, the consortium of 27 banks have argued before the Supreme Court that the money lent to Future Retail belonged to the depositors. And to safeguard the “public interest”, the entire assets of FRL can be subjected to open bids by Amazon and Reliance with a reserve price of Rs 17,000 crore.

A Bench headed by Chief Justice NV Ramana is hearing FRL’s plea. The court adjourned the hearing at the request of the company.