Future Retail may miss $14 million coupon payment on bonds

Future Retail Ltd may not be able to arrange funds to make $14-million coupon payments on foreign currency bonds on the due date on Monday, people familiar with the development said.

The Kishore Biyani-promoted company, which had raised $500 million in an overseas bond issue offering 5.6% returns in January 2020, has one-month grace period till February 22 to make the semi-annual coupon payment.

Even that may be difficult if it fails to clear dues of local banks by this month-end, sources said.

Future Retail, which had missed a Rs 3,494 crore payment to local lenders on December 31, has time till January 29 to prevent the account from defaulting. If it misses that, local lenders will classify the account as a non-performing loan on January 30.

And they may object to the company paying foreign bondholders since both are at par as secured creditors.

Local banks may convey to Future Retail that their dues should be cleared before making payments to USD bondholders, said one of the persons cited above.

“Since the company has defaulted to local banks, surely they (local lenders) will object to hypermarket paying foreign currency bondholders,” an executive at one of the local lenders told ET.

Another person said the payment to bondholders can be made if the Supreme Court rules approves the transaction between Future Group and Reliance Industries-linked entities before February 22, the end of grace period.

Future Retail did not respond to a request for comment till press time Saturday.

The coupon payment was due on Saturday (January 22), but it is rescheduled to Monday because as per the bond agreement those payments that are due on holidays get rescheduled to the next working day.

Future Retail has so far managed to make coupon payments to bondholders during the one-month grace period.

Domestic lenders have not objected to it in the past because circumstances were different. Either there was a moratorium on loan payments to local banks, or the company was covered under the one-time restructuring scheme for Covid-hit companies, which provided for a moratorium in initiate months of implementing the scheme.

Future Retail, which was over-leveraged, began facing a liquidity crunch in early March 2020. This, unfortunately, was followed by a nationwide lockdown for a few months due to Covid-19. This affected its revenues and ability to pay vendors. However, the Reserve Bank of India soon permitted banks to provide moratorium on loans availed by Covid-hit companies till August 30, 2020.

Reliance Industries group entities had in August 2020 signed a Rs 24,713-crore scheme of arrangement with Future Group companies for a multi-stage buyout of its retail business, but the deal is mired with litigations following allegations by ecommerce giant Amazon.com that the deal breached its shareholder agreement with Future Group.

A recent attempt by lenders to recover their dues by selling Future Group’s small-format stores Easyday and Heritage Fresh, numbering 850 across India, was also hampered after they failed to receive an implicit backing from Reliance Industries, as reported.

Amazon.com in a letter on January 19 offered to provide Rs 7,000-crore financial support to Future Retail but warned that the sale of small-format stores would violate injections by various courts.

In response, Future Retail said it is willing to accept the financial support provided Amazon infuses Rs 3,500 crore by Monday, as reported by ET.