S&P downgrades Future Retail on restructuring of onshore debt

Our Bureau Mumbai | Updated on April 29, 2021

Future Retail is seeking an injunction against Amazon along with a damages claim worth Rs. 100 crore

No change in rating on company’s US dollar-denominated senior secured notes

Future Retail’s one-time debt restructuring has led credit rating agency S&P Ratings to downgrade the retail company to ‘SD’ from ‘CCC-’.

“In our view, the restructuring constitutes a distressed exchange and is tantamount to a default because the likelihood of a conventional default in the absence of this transaction was high and there is inadequate offsetting compensation for lenders,” S&P Ratings said on Thursday.

The Kishore Biyani-owned company recently managed to get its loans restructured of its onshore debt. The total loan amount was approximately ₹10,200 crore which included extending the maturity of its term loans and other borrowings.

However, S&P hasn’t changed its long-term issue rating on the company’s US dollar-denominated senior secured notes, it remains unchanged at ‘CCC-’.

Reliance extends time to conclude Future Retail buy

Liquidity issues

Future Retail has been facing severe liquidity issues for over a year-and-half now which was exacerbated by the lockdown imposed in India to contain Covid-19. The company’s operating cash flows are severely depressed, given a near 70 per cent decline in sales.

“We expect to raise our issuer credit rating on Future Retail in the coming days, most likely to the ‘CCC’ category, after re-evaluating the company’s liquidity position post restructuring,” it said.

Future Retail gets lenders’ nod to restructure debt

Future Retail is an India-based retailer with about 1,388 stores across more than 400 cities.

On August 29, 2020, Reliance Retail had announced that it would acquire the retail and wholesale business as well as the logistics and warehousing business of Future Group for ₹25,000 crore. The completion of the deal has been delayed by legal issues with Amazon.

Published on April 29, 2021

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