Private lender IndusInd Bank this week agreed to sell its Rs 247 crore principal loans of Future Retail and Asian Hotels (North) Ltd to Edelweiss Asset Reconstruction Company at a consideration of Rs 195 crore, said two people aware of the development.
IndusInd Bank invited offers for the Rs 142 crore secured principal loan given to Kishore Biyani promoted Future Retail and Rs 105 crore principal loan given to Asian Hotel Delhi under the 15:85 basis, the people said.
Under the conventional 15:85 structure, the bank will receive 15% of the consideration as upfront payment, while for the remaining 85%, the ARC will issue security receipts (SR) which would be redeemed as they recover their dues from the borrowers.
The sale of Future loans comes at a time when another private lender CBS Bank has filed an application against Future Retail and Future Enterprises with Debt Recovery Tribunal (DRT) to recover their dues, a third person said.
For the private lender, the trade with the ARC would imply a haircut of around 20% however, if the recovery from any one of the two accounts is above the principal dues, the bank will stand to gain, one of the two people cited above said.
Edelweiss ARC and IndusInd Bank did not respond to comments.
Asian Hotels (North) Ltd, which owns and operates Hyatt Regency Delhi, a five-star hotel with 105 rooms. The company has entered into a one-time restructuring (OTR) under the Reserve Bank of India’s scheme for Covid-19 hit companies. It has a consolidated debt of Rs 1265 crore as of March 2021.
IndusInd Bank has made nearly 25% provision in the Future Retail loan and thus the entire 15% upfront payment will help reverse the provisions on this account. Most banks have provided between 25% and 40% for Future Retail after it failed to pay Rs 3495 crore by end of January as per the terms of OTR.
Domestic lenders are worried that delay in implementation of the Reliance-Future deal coupled with Reliance Industries taking control of over 900 stores of Future’s store would result in a haircut for them.
A Rs 24,713 crore asset sale deal between Reliance and Future group, signed in August 2020 is yet not implemented due to legal battle between Future Retail and ecommerce giant Amazon. Amazon has alleged breach of shareholder contract.
