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"All secured lenders have voted against the scheme of
arrangement put forward by Reliance," said a senior executive at
a state-owned lender.
"Initially we thought that any other alternative methods will
result in lower recoveries but since then it (Future) has been
entangled in legal issues and now we are unsure of the value
left in it," the source said.
The rejection by lenders comes amid a legal challenge by U.S.
e-commerce giant Amazon.com Inc which has accused Future of
violating certain contracts by dealing with Reliance, run by
India's richest man, Mukesh Ambani.
Future has denied any wrongdoing and said it will be pushed to
bankruptcy if the deal falls through. The case is being heard at
various legal forums, including an arbitration panel in
Singapore.
But in February Reliance, which had kept to the sidelines
earlier in the dispute, suddenly took control of hundreds of
Future stores, citing non-payment of rent, after assuming many
of the leases held by cash-strapped Future.
That spooked bankers, some of whom have already initiated debt
recovery proceedings against Future.
Future Group as a whole has more than $4 billion in debt and
lenders started classifying the loans as non-performing assets (NPA).
Typically, banks which are secured creditors are accorded the
highest priority during debt resolution. However, in this case,
Reliance in regulatory filings has assured bondholders of full
recovery, raising concerns at the lenders.
"The bondholders are getting preferential treatment and that is
not something that is palatable to the bankers," said another
banker, adding this was a further reason for rejecting the deal.
The yield on Future Retail's bond maturing in January 2025
jumped to a record high of 88.906% on Friday, compared with its
close of 37.680% on Wednesday.
Lenders are getting ready for a lengthy battle in bankruptcy
court which can take years to resolve, sources said.
Future and Reliance did not respond to requests for comment.
(Reporting by Nupur Anand and Abhirup RoyAdditional reporting by
Gaurav DograEditing by Kim Coghill and Mark Potter)
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