Lenders assess legal action over transfer of Future Retail store

Lenders are considering taking legal action against Future Retail after Reliance Industries (RIL) took control of nearly 200 large-format stores without their consent, two people with knowledge of the development said. The latest developments were discussed in a late evening video meeting between the lenders on March 4 (Friday).

In a separate meeting on Friday, Rakesh Biyani, CEO of Future Group, assured lenders that out-of-court settlement talks with Amazon are expected to conclude within 10 days, paving the way for RIL to acquire the company’s assets.

At Friday’s late-night meeting, lenders raised concerns about the value of their securities as Future Retail had taken out loans from domestic lenders mortgaging all present and future inventory in stores. “This amounts to an alienation of assets that have been mortgaged to us without our approval,” one of the lenders said.

At the same meeting, the lenders decided to publish a notice warning the public not to deal with the assets of the companies of the Future Retail group without explicitly seeking their agreement. This is to prevent anyone from taking over other Future Retail stores without their consent.

According to a Future Retail official, Reliance has not taken back the inventory that was in the store and so lenders are not at risk of losing their security. “Future has been told to clear inventory from stores and it’s highly unlikely stores will be rebranded any time soon,” the same person said. A spokesperson for Future Retail did not respond to the ET query.

A year ago, the owners of 200 stores transferred the lease to a Reliance Industries group company after Future Group failed to pay the rent. Reliance then sub-leased them to Future Group entities. It emerged last week that Reliance had terminated the sublease agreement for 200 stores after Future Group failed to make lease payments to the RIL-linked company.

“The mood of the meeting indicated that lenders felt aggrieved and running out of patience,” another lender said.

The development comes at a time when Future Retail has defaulted on ₹3,495 crore in payments to lenders as the company is embroiled in a legal battle with Amazon.com over an alleged breach of shareholder agreement which, in turn, delayed for more than a year. the execution of a ₹24,713 crore deal to sell the majority of its business to RIL-related companies.

Even foreign bondholders seemed disappointed with RIL’s takeover of 200 stores, as they held a lien on all present and future furniture and store fixtures. “With Reliance taking over 200 stores, our security is gone,” said one of the bondholders. In January 2020, Future Retail had raised $500 million in senior secured bonds due 2025.

Future Retail informed the exchange on February 26 that it was “reducing trading to reduce losses”. He said: “Termination notices have been received for a significant number of stores due to huge outstanding amounts, and we would no longer have access to those store premises.”

A similar notice was issued by Future Lifestyle Fashion (FLFL) to stock exchanges the next day.

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