Lenders led by Bank of India decided to refer Future Retail Ltd (FRL) to the National Company Law Tribunal (NCLT) for insolvency proceedings over recovery of dues. The lenders have invited financial and technical bids from insolvency professionals (IPs) by March 29,2022. This will be followed by a presentation from shortlisted IPs, said the people cited above. Grant Thornton, PwC, Alvarez & Marsal, KPMG, BDO India, EY and Deloitte are likely to bid for the mandate.
The move comes within a week of CSB Bank, owned by Prem Watsa’s Fairfax Group, approaching the Debt Recovery Tribunal (DRT) to seek payment of more than ₹2.5 crore in unsecured debts from FRL and Future Enterprises.
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The banks will also pursue recovery under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, which allows lenders to auction mortgaged properties.
EY is currently financial advisor to the Future Group and played a key role in putting together a one-time restructuring (OTR) package last April for all group entities hit by Covid-19. While implementing the OTR, lenders had appointed Deloitte as agency for specialised monitoring (ASM) of cash flows at all Future companies.
It takes a minimum six months to admit a company into insolvency proceedings despite the 14-day limit prescribed by the law. If this happens, the deal with Reliance may be impacted as other potential buyers will get an opportunity to bid.
A Rs 3,595 crore default in January as per the terms of the OTR scheme is one of the key triggers that prompted lenders to consider insolvency proceedings. The other factors were uncertainty about the quantum of recovery after Reliance Industries-linked companies took control of over 900 Future Retail stores a month ago over non-payment of rentals.
The decision to seek recovery through the insolvency route comes ahead of an April 20 meeting when lenders are to vote on the scheme of arrangement between Future Group companies and Reliance-linked companies. Future has Rs 17,500 crore of debt–a domestic component of Rs 13,800 crore from 27 lenders and Rs 3,700 crore in the form of overseas bonds. The company had raised 5.6% secured $500 million in bonds due in 2025.
