Lenders of Future Retail Ltd are not inclined to sign an inter-creditor agreement (ICA) until promoter Kishor Biyani submits a viable debt restructuring plan to revive the hypermarket operator, people informed about the development. said in.

Lenders, led by Bank of India, are scheduled to meet later this week to decide on the next course of action, as the deadline for signing the ICA ends on March 3.

Banks are of the view that if they sign the ICA without any plan, it will tie them to only one option - implementing a debt restructuring scheme. However, if they do not sign the ICA, they will have several recovery options in front of them.

RBI guidelines stipulate that lenders must sign an ICA within 30 days after the account is classified as a non-performing loan. Banks had classified the account as NPA on January 29.

Future Retail is embroiled in a legal battle with Amazon over alleged breach of shareholder agreement that has delayed the execution of a Rs 24,713 crore deal to sell most of its business to Reliance Industries-linked companies by over a year.

The company has Rs 17,500 crore of debt - a domestic component of Rs 13,800 crore from 27 lenders and Rs 3,700 crore in the form of overseas bonds. The company had last year in January raised 5.6% secured $500 million bonds due in 2025.

ET had reported last Thursday that Kishore Biyani informed lenders that the company would present a debt restructuring plan within 10 days.

The company's debt restructuring plan can be considered if all banks sign the ICA, as per the guidelinesissued by the RBI on June 7, 2019. Signing an ICA would prevent the company from entering into insolvency proceedings for at least another six months.

The RBI has mandated that all lenders should sign an ICA to prevent the risk of dissenting creditors filing an application for insolvency proceedings, thus disrupting the progress of other lenders on out-of-court restructuring. Most lenders are not keen on the insolvency and bankruptcy code (IBC) route as this would further delay the resolution of the account and there could be uncertainty on recovery.

The reluctance to sign the ICA immediately is because last month's first attempt to restructure the company's debt under the one-time restructuring plan for Covid-hit companies failed, resulting in banks tagging the account as a non-performing loan

Written by
Sakshi Sharma (CMA)