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Future Retail seeks Rs 3,500 crore from Amazon for debt repayment

Future Retail’s independent directors have agreed to accept Amazon’s proposal of financial assistance. FRL’s independent directors have requested a long-term loan of Rs. 3,500 crore from Amazon after the US conglomerate opposed the sale of its small-format stores.Future Retail official logo

Amazon recently accused Future Retail Limited (FRL) of violating the injunction and proposed financial assistance after learning that it was selling its small-format stores. Following up on the proposal, FRL considered Amazon’s plan to act through Samara Capital, owing to FDI restrictions in India’s multi-brand retail sector.

Future Retail, the retail arm of the Future Group, which owns Bigbazaar, Fashion at Big Bazaar (fbb), Koryo, Foodhall, and Easyday, among other brands, is in desperate need of capital to repay its lenders. FRL must pay its lenders Rs 3,500 crore by January 29, otherwise, it would be labeled as a non-performing asset (NPA).

Future Retail’s independent directors stated in a letter sent to Amazon on January 21, 2022, which reads, “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) through an unsecured, long-term loan, subordinated to FRL’s existing lender or any other mutually suitable and legally acceptable structure.”

The directors further noted that they are ready to allow Amazon to negotiate with the lenders directly while also demanding clarity on the compliance of the Amazon-FRL deal via Samara Capital. It went on to say that Amazon’s proposed investment of Rs 7,000 crore is much less than FRL’s next liability of Rs 9,000 crore due to lenders in March 2022 and that it requires an additional Rs 3,000 crore for operations until March 2022.

Future Retail has debts in excess of Rs 10,000 crore, comprising Rs 6,000 crore in short-term and long-term loans, Rs 3,500 crore in foreign currency bonds, and Rs 200 crore in non-convertible debentures. As a result, the retail giant offered to sell its retail, wholesale, and logistics divisions to Reliance for Rs 24,713 crore (~$3.4 billion), citing significant losses and possible dissolution.

Future Retail has currently missed the deadline for repaying Rs 3,494.56 crore to its lenders on December 31, 2021, as per the guidelines of the one-time restructuring (OTR) agreement. The company blamed the delay on a dispute with an American e-commerce firm and said it hoped to return the debt within the following 30 days by January 29, 2022.

Future Retail eventually moved to the Delhi High Court to dismiss Amazon’s case in order to complete its merger with Reliance within the month’s grace period. In its filing, Future stated, “The continuation of the entire arbitration proceedings is a perpetuation of illegality.” As the dispute between Future Group, Amazon, and Reliance Retail continues, Future Retail recently decided to sell its small-format stores in order to pay the first installment of debt repayment.