“We reiterate our willingness and ability to assist FRL in addressing any financial concerns of FRL, within the framework of the agreements, including the solution proposed in the termsheet between Samara Capital, and FRL, which contemplated an infusion of [Rs 7,000 crore] in FRL,” Amazon wrote in a letter sent to FRL’s independent directors on Wednesday.
In the letter, which ET has reviewed, Amazon warned FRL that it was prohibited from “directly or indirectly taking any steps to transfer, dispose, alienate or encumber FRL’s retail assets” without Amazon’s consent.
It said any sale of small format stores without Amazon’s consent “would be in violation of the injunctions which continue to operate and are binding on FRL and directors of FRL, including the independent directors of FRL,” Amazon said, adding that it was “more than willing” to explore effective solutions to assist FRL.
Sources told ET that lenders of Future Retail have decided not to go ahead with the sale of small-format stores as they failed to receive implicit support from RIL for the proposed plan. Amazon’s letter, which was also sent to banks, prompted the lenders to hit pause on the proposal, people briefed on the matter said.
Earlier this month, ET reported that lenders of Future Retail
were likely to seek buyers for its small-format stores to recover dues worth Rs 3,494.5 crore after it failed to honour payments scheduled on December 31.
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Lenders were preparing to sell Easyday and Heritage Fresh brands numbering about 850 across India.
Future Retail, RIL and Amazon India did not respond to ET’s queries till press time Thursday.
“Yes, we have received the letter and we are going to discuss it later today,” FRL’s independent director Ravindra Dhariwal said. “This is for the first time (Amazon) they have given an offer. So, we will discuss it. It is good that we have been given an offer and we will see what we can do with that and accordingly we will respond to them,” Dhariwal said, adding that the three independent directors of FRL are slated to hold a meeting on Thursday evening.
“The proposed sale also hinged on implicit support lenders were seeking from RIL that despite this sale they (RIL) will go ahead with the 29 August 2020 deal,” said one of the lenders present in the meeting. “In this context, lenders wanted a no-objection certificate from RIL since the long stop date on the Rs 24,713 crore deal—which also included the small-format stores—was till March 31, 2022.”
In June 2020, Samara Capital had signed a non-binding term sheet to acquire FRL’s businesses including Big Bazaar, Easyday and Heritage among other chains for Rs 7,000 crore.
In absence of any response from RIL, lenders are rethinking their strategy on recovering their dues. Selling the small-format store was the last-ditch attempt by lenders to prevent the account from being classified as a non-performing loan.
In April 2021, Future Retail had committed to pay Rs 3,494 crore to lenders by December 31, 2021, in line with a one-time restructuring deal that was designed for pandemic-hit companies. Future Group was hoping the proposed deal between them and Reliance Industries-linked companies would be concluded much before December 31, thereby invalidating the one-time restructuring, the lender quoted above said.
Future Retail and Amazon have been battling in court over the nearly Rs 25,000-crore Reliance-Future deal—announced in August 2020—for more than a year. Amazon has long argued that Future violated the terms of their 2019 deal in deciding to sell retail assets to Reliance. Amazon’s lawyers have on many occasions said that the US giant had lined up Samara Capital to fund FRL and the private equity firm had even signed a term sheet with the Indian retailer before Reliance Retail stepped into the fray.
Amazon swiftly moved the Singapore International Arbitration Centre (SIAC) in October 2020 against Future Group’s plans to sell its assets to Reliance Retail Ventures Ltd. and received an injunction against the deal from an emergency arbitrator.
While the SIAC ruling was held effective in India, the Delhi High Court earlier this month
stayed arbitration proceedings between the two companies after the Competition Commission of India last month suspended its 2019 approval of the Amazon’s investment into Fututre Coupons Pvt. Ltd., a promoter firm that holds about 10% stake in Future Retail. Amazon has challenged the ruling, but the arbitration has been put on hold for now.
