S&P lowers Future Retail’s long-term rating to ‘SD’ after default

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On Wednesday, S&P Global Ratings downgraded the long-term credit rating of the issuer of Future Retail Ltd from “CCC-” to “SD” after the company failed to repay the principal of its debt.

Future Retail Ltd has failed to make the principal payments due on its restructured domestic bank loans on 31 December 2021. The 30-day review period (grace period to pay) allowed by the Reserve Bank of India (RBI) has ended , S&P said in a statement.

Principal repayment of approximately Rs 3,500 crore was due on December 31, 2021 on the company’s bank loans under a one-time restructuring plan implemented by onshore lenders in April 2021. The company s is granted a 30-day review period to remedy the defect.

Future Retail failed to remedy the default amid an unsuccessful attempt to monetize its small-format stores and insufficient cash flow to meet the large repayment obligation, the rating agency said.

“We have therefore lowered our long-term credit rating on Future Retail to ‘SD’ from ‘CCC-‘,” he said.

“We have affirmed our ‘CCC-‘ long-term issue rating on Future Retail’s US dollar-denominated senior secured notes as we expect the company to service the semi-annual coupon during the grace period.”

Future Retail, which has about 1,388 stores in more than 400 cities, is embroiled in a legal dispute with Amazon that has prevented billionaire Mukesh Ambani’s Reliance Group from acquiring the retail and wholesale businesses as well as the business of logistics and warehousing of Future Group.

S&P said it affirmed the issuance rating for Future Retail’s $500 million senior secured notes, as it expected the company to service the semi-annual coupon during the 30-day grace period, in line with past trends.

Coupon was due on tickets on January 24, 2022.

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