FRL asset sale to Reliance Retail: Creditors reject but shareholders okay


Future Retail’s Rs 24,713-crore deal to sell its assets to Reliance Retail Ventures Ltd, a subsidiary of Reliance Industries, has run into a roadblock with majority of lenders rejecting the asset sale plan in the creditors meeting. However, shareholders of the company promoted by Kishore Biyani approved the sale proposal in a separate meeting.

According to an exchange filing, in the secured creditors e-voting, 69.29 per cent of the votes of 11 lenders were against the proposal to sell the assets to the RIL subsidiary. However, 30.71 per cent of the votes of 34 lenders favoured the sale of assets.

In the shareholders meeting, 85.94 per cent of the votes supported the sale of assets to RIL and 14.05 per cent of votes were against the proposal. However, 78.22 per cent of FRL’s unsecured creditors voted in favour of the proposal, the company said in a regulatory update. About 82.75 per cent of Future Lifestyle Fashion’s (FLF) secured creditors rejected the proposal, while 81.91 per cent of shareholders supported the move, company said.

Future Supply Chain Solutions, another group company, received 81.63 per cent of votes of secured creditors in favour, while 18.37 per cent rejected the move. Nearly 50.35 per cent shareholders approved the move, it added.

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.

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 retail giant Amazon has opposed the FRL’s deal with RRVL. Amazon last week 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.

In a regulatory update on April 16, FRL said “the said order has been issued by the NCLT, after considering all the facts and information submitted by the parties and specific objections filed by Amazon.Com NV Investment Holdings LLC vide an intervening application and the order dated February 15, 2022 issued by Supreme Court on the same subject matter”.

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 — as defined in the one-time restructuring (OTR) plan — to various consortium banks and lenders before March 31, the company said in an exchange filing.


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