Lenders ask SpaceMantra to sweeten Rs 550 cr offer for Future Retail

The Indian lenders asked Space Mantra, the highest bidder for Future Retail, to further sweeten his offer at Rs. 550 crores to the company. Lenders claims of Rs. 19,400 crore has been accepted against the bankrupt company. They would have to make a whopping 97 percent reduction on their claims.

“We are in negotiations with the highest bidder, asking him to improve the offer as the recovery rate for lenders is less than 3 percent,” a source familiar with the development told.

“This is a bad deal for the lenders who have claimed Rs. 21,000 crores against the company, but the resolution professional has only accepted claims of Rs. 19,400 crores. The haircut will be one of the highest in insolvency and bankruptcy (IBC) cases,” said a source.

Shaving is the amount that banks give up to make the account standard.

The email sent to SpaceMantra had not elicited a response as of press time.

The company was sent to settle debts under IBC, 2016, in October last year after Kishore Biyani defaulted on its banks and suppliers.

In April this year, 49 companies sent expressions of interest to acquire the company, but most of them declined while submitting a binding offer. Of the 49, only six companies – mostly scrap dealers – sent their bids binding.

Future Group companies began struggling even before the pandemic closed 1,800 stores in 420 cities.

In August 2020, the group announced Rs. 24,700 crore Transaction with Reliance Retail: All businesses are to be merged under one entity and converted into Reliance entity.

This transaction was later rejected by the lenders, and the companies were sent to settle debts under the IBC.

Interestingly, before Future Group companies started showing signs of financial distress, the group raised Rs. 4,620 crore ($622.7 million) between April and December 2019 through a mix of debt, equity and equity sales.

of this Rs. 1,750 crore has been invested by Blackstone and Rs. Rs 590 crore has been raised from Apollo, the private equity (PE) company, as debt.

AION Capital Partners and UBS have also invested Rs. 500 crore. 350 crore as debt to a graphic promoter entity, according to research firm Redd.

The cost of the money raised from the private equity firms was very high. According to the report submitted to the Ministry of Corporate Affairs, the pricing fee for these loans has been a staggering 26.5 percent per annum over four years. These high cost loans later led to defaults and bankruptcy.