No waiver for Future Financial promoter on personal guarantee

Banks are not likely to waive their demand for a personal guarantee from the promoter of Future Financial Services for restructuring the debts of the company, bankers familiar with the development have said.

This will leave G Dasaratha Reddy, managing director of Andhra Pradesh-based Future Financial, as the sole microfinance promoter to offer a personal guarantee in the debt recast programme of five microfinance institutions.

During the debt recast programme of microfinance companies, which was referred to the corporate debt restructuring cell, banks had demanded personal guarantee from promoters of all the five micro-lenders — Asmitha Microfin, Future Financial, Share Microfin, Spandana Sphoorty Financial and Trident Microfin.

However, with microfinance promoters, barring Reddy, opposing the move, banks decided to give up their demand a few days before the deadline for finalising the debt restructuring package expired. Reddy had initially agreed to offer his personal guarantee, as he was not a beneficiary of this waiver.

“The deadline for finalising the restructuring programme was June 6. It is not possible to modify the agreement now without making a fresh proposal. It is not likely that the personal guarantee clause for Future Financial’s debt restructuring will be waived,” a senior banker involved in the microfinance companies’ debt restructuring programme said.

He, however, clarified that the clause would exist “only in spirit” and the bankers were unlikely to exercise this option as they had waived their demand for promoters’ personal guarantee in case of the other microfinance companies.

Reddy confirmed the development. “We met the bankers earlier this month and requested them to waive the personal guarantee clause in our case also. They have told us that it is only there to demonstrate that promoters are committed to their business. We are okay with it,” he told Business Standard.

Future Financial has around Rs 160-crore debt on its books, of which about Rs 99-crore loans are proposed to be restructured.