Future lenders may ask RBI to delay NPA tag

After 19 months moratorium on repayment, Future Retail to pay lenders 3,494.56 crore on or before December 31. On Saturday, the company said it failed to meet the repayment obligation. Subsequently, CARE Ratings downgraded Future Retail’s non-convertible debentures, long-term bank facilities and short-term bank facilities to default grade (Care D).

“This is an exceptional case where the account may soon become non-performing as a deal has been mired in a long-running litigation despite having been signed a year ago. will be able to sell the properties and repay,” the banker said, seeking anonymity.

As part of the debt restructuring process, Future Retail was to repay lenders by selling off certain non-core assets; However, its efforts have not yielded results. The relaxation of RBI from the NPA classification rule may help banks avoid making heavy provisioning, which would reduce profits.

Mint reported on Monday that Future Coupons Ltd, a conglomerate entity, has moved the Delhi High Court to end the ongoing arbitration proceedings initiated by Amazon and at the Singapore International Arbitration Centre.

“We cannot approach RBI based on the recent Competition Commission of India (CCI) order and will have to wait for the court to pronounce its verdict on the petition filed by Future for quashing the arbitration proceedings. If the court considers the petition, we can make our case for extension citing exceptional circumstances,” the banker said.

Lenders to Future Retail 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 CARE Ratings data, the company owes banks 6,278 crores. Emails sent to the spokespersons of Future Retail and lenders consortium leader Union Bank of India remained unanswered.

Last month, CCI suspended and penalized its 2019 approval to buy Amazon’s 49% stake in Future Retail’s parent Future Coupons Ltd. 202 crores reportedly for not coming out about the actual scope of the deal.

Future Coupons holds a 7.3% stake in Future Retail through convertible warrants. As part of the investment agreement between Future Group and Amazon, the American company secured the right to buy into Future Retail after three to 10 years, and vetoed selling the company to a number of specific companies, including Reliance Industries Ltd. Future signed a deal. Agreement to sell Reliance, Amazon moved an arbitration court in Singapore which issued an emergency order to stop the sale.

Under RBI’s debt restructuring framework released on 6 August 2020, Future Retail has 30 days from the due date to repay the lenders and avoid the NPA tag. However, if loans are still in default with any lender at the end of this review period, they will be classified as non-performing. In that case, provisions would have to be made as if the restructuring never took place, forcing banks to classify the account as “doubtful”, with the latter requiring at least 25% provisions. “The long stop date for the deal has anyway been extended to 31 March. So we plan to request RBI for some tolerance till then, so that the account does not become NPA in 30 days,” the banker said. said.

In August 2020, Reliance Retail Ventures Ltd., a unit of Reliance Industries, agreed to buy Future’s retail assets on a bearish sell-off basis. 24,713 crores. Future Group is trying to expedite the deal with Reliance to pay off creditors and save the Big Bazaar retail chain from a possible collapse.