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Future Enterprises plans to prepay NCDs from proceeds of Rs 24,713 cr deal with Reliance

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Future Enterprises Ltd (FEL) is planning to prepay the debentures issued by the company from the money to be received after selling its retail and other businesses to Reliance Industries' step down firm Reliance Retail Ventures.

Future Enterprises plans to prepay NCDs from proceeds of Rs 24,713 cr deal with Reliance
Future Enterprises Ltd (FEL) is planning to prepay the debentures issued by the company from the money to be received after selling its retail and other businesses to Reliance Industries' step down firm Reliance Retail Ventures. The company has proposed to utilise the consideration received from the Rs 24,713 crore deal for pre-payment of the Non-Convertible Debentures (NCDs), FEL said in a regulatory filing.
FEL is convening a meeting of its debenture-holders of Series XV on January 7 next year to consider and approve prepayment of debentures and amendment of the Debenture Trust Deed. As part of the overall reorganisation proposal, the company proposes to utilise the consideration to be received from Reliance entities from slump sale of the business undertakings, to prepay the various NCDs the company has issued and one of the NCDs proposed to be prepaid is NCD-XV, viz the debentures held by debenture holders of this meeting, FEL said in a notice for convening of the meeting.
FEL has raised funds by issuing various debt instruments including NCDs by way of private placement, from time to time for its expansion. However, the Future group firm has reported several defaults on interest payment of NCDs after the pandemic.
According to FEL, COVID-19 had a significant impact on businesses and particularly, lockdown, closure of stores and the slowdown in economic activity resulted in significant decrease in its revenues and profitability. To put it simply, our liquidity position has been affected for reasons beyond our control and despite our sincere efforts, we are currently facing extreme difficulty in generating the cash required to service our external debt obligations, it said.
As per the terms of the offer for its NCD-XV, FEL was expected to pay to the debenture-holders, the amount of interest and principal on respective due dates. However, COVID-19 severely impacted cash flows and it utilised Rs 5.13 crore from Debt Service Reserve Account (DSRA) created for NCD-XV for paying interest, FEL said. It has also requested the holders to consider relaxation in the clauses of Debenture Trust Deeds, which mandates that if the company utilises DSRA, it should replenish the same within a period of seven days.
However, the reason of the company utilising the DSRA is due to it not having ready cashflows available and it would be difficult for the company to ensure the same at least for another six months, till the time the transaction is consummated," the company said. Accordingly, FEL has also proposed to modify the clause and remove the replenishment condition to ensure that there is neither any default or cross-default which gets triggered due to non-replenishment of DSRA.
On August 29, 2020, Future had announced the sale of its retail and wholesale business and logistics and warehousing business by merging 5 listed entities of the Group and 14 subsidiary and step-down subsidiaries companies into FEL. As per the deal, Reliance Retail Ventures would acquire the popular Future brand stores such as Big Bazaar, fbb, Foodhall, Easyday, Nilgiris, Central and Brand Factory.

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