Reliance recalls $3.4-billion Future assets deal after secured creditors vote against scheme

The $3.4 billion deal to take over the retail assets of Future Retail Ltd (FRL) cannot be implemented as the company's secured creditors have "voted against the scheme", Reliance Industries Ltd (RIL) informed the stock exchanges on April 23.

The regulatory filing comes in the backdrop of voting conducted by FRL amongst its shareholders and creditors on the scheme to transfer its assets to Reliance Retail Ventures Ltd (RRVL), a wholly-owned subsidiary of RIL.

Future group has intimated the results of the voting on the scheme of arrangement by their shareholders and creditors at their respective meetings, Reliance said.

"As per these results, the shareholders and unsecured creditors of FRL have voted in favour of the scheme. But the secured creditors of FRL have voted against the scheme," it noted.

"In view thereof, the subject scheme of arrangement cannot be implemented," RIL further added.

The rejection by lenders comes amid a long-drawn legal challenge by US e-commerce giant Amazon.com Inc which has accused Future of violating certain contracts by dealing with Reliance, run by Mukesh Ambani.

Future has denied any wrongdoing and has said it will be pushed to bankruptcy if the deal falls through. The case is being heard at various legal forums, including an arbitration panel in Singapore.

But in February Reliance, which had been in the shadows through the dispute, suddenly took control of hundreds of Future stores, citing non-payment of rent, after assuming many of the leases held by cash-strapped Future.

That spooked bankers, some of whom have already initiated debt recovery proceedings against the firm. Future Group as a whole has more than $4 billion in debt and lenders started classifying the loans as non-performing assets (NPA).

Typically, banks that are secured creditors are accorded the highest priority during debt resolution. However, in this case, Reliance in regulatory filings has assured bondholders of full recovery, raising eyebrows at the lenders.

"The bondholders are getting preferential treatment and that is not something that is palatable to the bankers," a banker told Reuters, adding that this was another reason for rejecting the deal.

With inputs from Reuters

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