Future Retail takeover cannot be implemented, RIL says in filing

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A day after Future Group’s proposed deal for Rs 24,713 crore to sell its assets to Reliance Retail was rejected by a majority of lenders to Future Retail Ltd (FRL) flagship Reliance Industries in a stock market intimation on Saturday, stated that as such the scheme of arrangement “cannot be implemented”.

On Friday, secured lenders rejected Future Retail’s deal to sell its assets to Reliance Retail Ventures Ltd, a subsidiary of RIL.

“FRL’s shareholders and unsecured creditors voted in favor of the plan. But the FRL’s secured creditors voted against the project. In view of this, the scheme of arrangement in question cannot be implemented,” RIL said in a regulatory filing.

According to the exchange filing, in the electronic vote of secured creditors, 69.29% of the votes of 11 lenders were against the proposal to sell the assets to the subsidiary of RIL, while 30.71% of the votes of 34 lenders were against. favorable to the sale of assets. .

However, 78.22% of FRL’s unsecured creditors voted in favor of the proposal, the company said in a regulatory update. At the shareholders’ meeting, 85.94% of the votes supported the sale of assets to RIL and 14.05% of the votes were against the proposal.

Future Group owns retail chains such as Big Bazaar, Food Bazaar, FBB, HomeTown, Central and Brand Factory.

Some major banks were not in favor of the proposal stating that there is ambiguity over debt collection. “If the big banks oppose the sale to RIL, the deal is likely to fall through. The next option is to go the IBC route,” a banking source said.

The banks are now expected to move the bankruptcy court for a resolution plan. While FRL has proposed that more than Rs 12,000 crore of debt be transferred to RIL, the banks are not convinced.

In February, Reliance began taking over the leases of hundreds of stores formerly run by FRL and Future Lifestyle Fashions Ltd amid lawsuits and arbitrations in India and Singapore. The banks have already questioned RIL’s takeover of some of the Future stores and said anyone dealing in the company’s assets should bear in mind that these are subject to the charge of lenders at all times.

US retail giant Amazon opposed the FRL’s deal with RRVL. Amazon had said last week that the meetings were “unlawful” and that such a move would not only violate the 2019 agreements when it invested in the FRL-promoting company, but would also violate an arbitral tribunal’s injunction to Singapore on sale of retail assets to Reliance.

FRL had rejected Amazon’s claims and said the meetings were “consistent” with instructions issued by the NCLT on February 28, 2022, to review and approve the Scheme of Arrangement filed by various entities that are part of the agreement.

In an April 16 regulatory update, FRL said that “said order was issued by the NCLT, after considering all of the facts and information submitted by the parties and the specific objections filed by Amazon.Com NV Investment Holdings LLC under form of an intermediate request and the order of February 15, 2022 issued by the Supreme Court on the same subject”.

The Future Group has been in default since last year. On April 1, Future Retail said that it had not infused Rs 3,900 crore in the form of equity into the business before the due date of March 31, 2022. Moreover, considering the injection of capital, the company was required to pay a total amount of Rs 5,322.32 crore – as defined in the Single Restructuring Plan (OTR) – to various consortium banks and lenders by March 31, the company said in an exchange file.

Reliance Industries’ setback by the banks’ rejection of its proposal to buy the assets of Future Retail bears some similarities to that where RIL’s agreement with Reliance Communications Ltd to buy the latter’s assets was terminated from a agreement.

In December 2017, Reliance Jio entered into an agreement to acquire specified assets including spectrum, towers and other wireless infrastructure from Reliance Communications and its subsidiaries, led by Anil Ambani, for approximately Rs 17,000 crore.

After that, Reliance Communications decided to settle its debt with the NCLT, and the DoT threatened to reject the spectrum-swap agreement demanding repayment of public dues.

In March 2019, the two companies mutually terminated the asset sale agreement, blaming, among other reasons, lack of consent from lenders and DoT clearances for fallout.

In March 2020, Reliance Communications lenders approved resolution plans for Delhi-based company UV Asset Reconstruction and an RIL unit for the beleaguered company, but the proposal has yet to receive court approval. bankruptcies.

In resolution plans approved by creditors, RIL had placed an offer of around Rs 4,700 crore for the tower and fiber assets of Reliance Infratel Ltd (RITL), while UVARCL made an offer of Rs 14,000 crore for spectrum, real estate, business and data center assets, owned by RCom and Reliance Telecom Ltd.

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