Future Retail Independent Directors Seek Amazon’s Help For INR 3500 Cr Loan Repayment

The independent directors of Kishore Biyani-led Future Retail Limited (FRL) have agreed to accept Amazon’s offer of financial assistance.

Recently, after Amazon learnt that FRL was selling its small-format stores, it alleged violation of the injunction and proposed financial assistance to FRL. Following up on the proposal, FRL also mulled on Amazon’s proposal to act through Samara Capital, since FDI is restricted in the multi-brand retail sector in India.

Future Retail, the retail arm of the Future Group, that owns Bigbazaar, Fashion at Big Bazaar (fbb), Koryo, Foodhall and Easyday, among others, is in urgent need of cash infusion to repay its lenders. FRL is required to pay its lenders INR 3,500 Cr by January 29, failing which it will be classified as an NPA

In a letter sent by FRL to Amazon on January 21, 2022, Future Retail’s independent directors stated, “Since you are objecting to the sale of small-format sales, the proceeds of which were to be used to repay lenders and thereby avoid NPA classification, please confirm that you are willing to fund this amount by Monday [January 24, 2022] through an unsecured, long-term loan, subordinated to FRL’s existing lender or any other mutually suitable and legally acceptable structure.”

The directors also stated that they are willing to let Amazon engage with the lenders directly while also seeking clarity over the compliance of the deal between Amazon and FRL via Samara Capital.

It further stated that Amazon’s proposed infusion of INR 7,000 Cr is significantly lower than FRL’s next liability of INR 9,000 Cr due to lenders in March 2022, and it needs another INR 3,000 Cr for operations, till March 2022.

The Sword Hanging On Future Retail’s Neck

Future Retail has borrowings of more than INR 10,000 Cr including short-term and long-term loans of over INR 6,000 Cr, foreign currency bonds of about INR 3,500 Cr and non-convertible debentures worth INR 200 Cr. Thus, the retail giant proposed to sell its retail, wholesale and logistics arm to Reliance for INR 24,713 Cr ($3.4 Bn), citing heavy losses and possible dissolution.

Future Retail has currently missed the due date of repayment of INR 3,494.56 Cr to its lenders on December 31, 2021, as per the terms of the one-time restructuring (OTR) agreement. The retail enterprise blamed the delay because of the dispute with Amazon and sought to repay the debt in the next 30 days — by January 29, 2022.

To sail through the month’s grace period and come to a conclusion on its deal with Reliance, Future Retail wanted Delhi HC to nullify Amazon’s case. “The continuation of the entire arbitration proceedings is a perpetuation of illegality,” Future had said in its filing.

As the altercation between Future Group-Amazon-Reliance Retail nears no end, Future Retail recently sought to sell its small-format stores, to pay the first instalment of the debt repayment.

Amazon Previously Accused Future Group Of Financial Irregularities

The 2020 deal between Future Retail and Reliance Retail has not gone well with Amazon; which bought 49% stakes in Future Coupons, ultimately acquiring a 3.58% stake of FRL in 2019. In 2021, as the altercation between Amazon and Future Group intensified, the former accused the latter of financial irregularities.

In a letter to Future Retail’s independent directors, the US-based ecommerce giant has previously claimed that significant amounts may have been diverted from Future Retail. “By unwinding at least part of these transactions, Future Retail can immediately partially repay the outstanding debt owed to banks and creditors to ensure business continuity and survival,” it added.

Further alleging significant fund diversion, Amazon has urged the independent directors and regulatory bodies to consider an independent investigation.

This time, as Future Group planned to sell its small-format stores, Amazon has offered INR 7,000 Cr as a loan via Samara Capital, to help cash-strapped Future Retail.

The Tidings On Amazon-Future Group Case

In December 2021, CCI had temporarily suspended the 2019 Amazon-Future Coupons deal when Amazon had bought a 49% stake in Future Coupons, thereby getting an indirect stake in Future Retail.

On January 15, Amazon filed an appeal against the suspension decision at the National Company Law Appellate Tribunal (NCLAT).

Meanwhile, since Amazon’s entire claim to sabotage the Future Group-Reliance Retail deal banked on the now-suspended 2019 deal, Future Group sought cancellation of trials in Singapore arbitration. This was first overruled by the Delhi High Court and later accepted in an urgent hearing. In that case, Amazon has reportedly made an appeal at the Supreme Court challenging Delhi High Court’s decision to suspend arbitration proceedings.