Reliance Cancels Rs24,700 Crore Future Deal

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What has happened?

Almost 21 months after signing an agreement for a ₹24,713-crore deal with Kishore Biyani-led Future Group to acquire its retail, wholesale, logistics and warehousing assets,
Reliance Industries Ltd on Saturday said the transaction cannot go ahead as secured creditors of the latter have voted against it.
The main differences between secured and unsecured creditors is the order in which they receive monies and what kind of security they hold over a company.
Secured creditors are first in the payment hierarchy, followed by unsecured creditors.

On Friday, secured lenders rejected Future Retail Limited’s (FRL) Rs 24,713 crore deal to sell its assets to Reliance Retail Ventures Ltd (RRVL), a subsidiary of RIL.
“The shareholders and unsecured creditors of FRL have voted in favour of the scheme. But the secured creditors of FRL have voted against the scheme.
In view thereof, the subject scheme of arrangement cannot be implemented,” RIL said in a regulatory filing.

According to an exchange filing, in the secured creditors e-voting, 69.29% of the votes of 11 lenders were against the proposal to sell the assets to the RIL subsidiary.
However, 30.71% of the votes of 34 lenders favoured the sale of assets.
However, 78.22% of FRL’s unsecured creditors voted in favour of the proposal, the company said in a regulatory update.
Future group owns retail chains including Big Bazaar, Food Bazaar, FBB, HomeTown, Central and Brand Factory.

Some leading banks were not in favour of the proposal stating there’s ambiguity on debt recovery.
“If top banks are opposing the sale to RIL, the deal is likely to fall through. The next option is to take the IBC route,” said a banking source.
Banks are now expected to move the bankruptcy court for a resolution plan. While FRL has proposed that over Rs 12,000 crore debt will be transferred to RIL, banks are not convinced about it.
In February, Reliance began taking over the rental leases of hundreds of stores once run by FRL and Future Lifestyle Fashions Ltd amid lawsuits and arbitration across India and Singapore.
Banks have already questioned the RIL takeover of some of the Future stores and stated that anybody dealing in the company’s assets should keep in mind that these are subject at all times to the charge of the lenders.

US online retail giant Amazon has opposed the FRL’s deal with RRVL.
Last week, Amazon had said the meetings were “illegal” and such a step would not only breach the 2019 agreements when it made investments into FRL’s promoter firm,
But also violate a Singapore arbitral tribunal’s injunction on the sale of retail assets to Reliance.
FRL had rejected the Amazon’s allegations and said the meetings are “in compliance” with the directions issued by the NCLT on February 28, 2022,
To consider and approve the Scheme of Arrangement filed by various entities which are part of the deal.

Future group has been defaulting on repayment since last year.
On April 1, Future Retail said it failed to infuse Rs 3,900 crore by way of equity in the company before the due date of March 31, 2022.
Further, considering the infusion of capital, there was an obligation on the company to pay an aggregate amount of Rs 5,322.32 crore — to various consortium banks and lenders before March 31, the company said in an exchange filing.