The independent directors of Future Retail Ltd (FRL) have asked Amazon to immediately give ₹3,500 crore to help it pay off its dues to the lenders by January 29.
They also took note of Amazon’s fresh offer to support FRL.
The independent directors emphasised that FRL is in need for cash infusion urgently to repay its lenders. FRL is required to pay its lenders ₹3,500 crore by January 29, 2022, failing which it will be classified as an NPA.
“Since you are objecting to the sale of small- format sales, the proceeds of which were to be used to repay lenders and thereby avoid NPA classification, please confirm that you are willing to fund this amount by Monday (January 24) through an unsecured, long-term loan, subordinated to FRL’s existing lenders or any other mutually suitable and legally acceptable structure.
“If you do so, FRL will use such funds in order to repay FRL’s existing lenders,” the independent directors said in a communication to Amazon.
This comes after Amazon wrote to the directors offering to help the cash strapped retail company.
On January 19, 2022, Amazon had written to the independent directors reiterating its willingness to assist FRL including resurrecting a proposal from 2020 wherein Samara Capital would acquire equity in FRL for ₹7,000 crore.
This comes even as Amazon and FRL are at loggerheads over the latter’s plan to merge with Reliance Retail. While Amazon doesn’t want FRL to partner with Reliance, FRL thinks this is the only way to keep the business afloat.
Amazon’s fresh offer
Responding to Amazon’s fresh offer to help financially, FRL directors said that they are willing to consider the proposal, which should be comprehensive and provide a solution for banks, employees, vendors, and other stakeholders.
“We note that your letter refers to a potential transaction between Samara Capital and FRL, as a “solution”. In this regard, you are requested to confirm if Amazon can act on behalf of Samara Capital and has the authority to negotiate and finalize such transaction on its behalf,” FRL independent directors said.
They also requested Amazon to confirm the structure for the proposed transaction, and that the manager of Samara Capital is owned-and-controlled by resident Indians.
“As you know, FRL is in the multi-brand retail sector, and FDI in this sector is restricted. You are also aware that Amazon’s transaction in Future Coupons, has resulted in regulatory scrutiny, including by the Competition Commission of India, as well as enquiries by the Enforcement Directorate.
“It is therefore critical that any investment being proposed is in compliance with all applicable laws, including FDI laws, CCI regulations and SEBI regulations, and that any such transaction should not raise further regulatory scrutiny,” they added.
FRL’s liabilities
The directors added that FRL’s liabilities to its lenders aggregates to ₹9,119.31 crore for interest and principal repayments to lenders up to March 2022 (including immediate payment of overdue amount of ₹3,494.56 crore) and ₹2,908 crore for operations up to March 2022 and the proposed infusion by Amazon is significantly below that.
“The timing of such cash infusion is not clear, despite it being clear that FRL’s cash requirements are immediate. It is not clear on how such infusion will be implemented in a legally-compliant manner,” the directors said.