Deal’s Off! Lenders Disapprove of $3.4Bn Deal b/w Reliance and Future Retail

Photo by Jackson Simmer on Unsplash

There’s no denying that Mukesh Ambani-led Reliance Group, is on an expansion spree. In August 2020, the mega empire had plans of taking Future Group’s 19 companies – operating in retail, wholesale, logistics and warehousing segments – under its Reliance Retail Ventures Ltd (RRVL). 

By doing so, Future Retail’s bankruptcy would have been nipped in the bud. 

Too bad for the debt-laden retail empire – the $3.4 billion deal has been suspended as Future’s secured creditors have voted against it – leaving the company stony broke.

The Board Game

FRL needed the approval of its secured creditors – like State Bank of India, Bank of India and Union Bank of India who constituted a majority of 75%  – for the deal to get through. 

Why were the creditors upset? Bank of India filed a petition to initiate insolvency proceedings against the debt-ridden company due to its payment defaults. Its long-running legal feud with Amazon was the reason why Future could not pay up to lenders.

Retail Wrangle

Going back in time, Amazon had initiated various litigations against FRL, who told the Court that Amazon had quashed its Rs. 26,000 Cr business for Rs.1,400 Cr (worth of the Amazon-Future disputed deal). 

Amazon thus opposed the RIL-FRL deal.

Future had already closed shop

In February, Reliance Retail had taken over the operations of 350 stores of the Kishore Biyani-led group after the latter defaulted on its lease payments. Amazon juxtaposed the transfer of Future Retail’s assets with “Ripley’s Believe It or Not.” 

Too long? Here’s a one-liner: Future Retail Ltd. is on course to bankruptcy – Secured creditors rejected the Reliance deal and Bank of India initiated insolvency proceedings owing to FRL’s payment defaults.

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