Future Retail, headquartered in India, has completed a one-time debt restructuring.
Future Retail Ltd.’s long-term issuer credit rating has been downgraded from “CCC-” to “SD,” implying default, by global rating agency Standard & Poor’s. Following the restructuring of onshore debt, the rating action was taken.
Future Retail, based in India, has completed a one-time restructuring of its onshore debt (approximately Rs 10,200 crore), which included deferring the maturity of term loans and other borrowings.
The reorganisation is a distressed transaction. In the absence of this transaction, the risk of a traditional default was high, and there was insufficient offsetting protection for lenders, S&P said in a statement.
After re-evaluating the company’s liquidity status following the restructuring, the rating agency expects to lift Future Retail’s issuer credit rating in the coming days, most likely to the ‘CCC’ level. The feasibility of the company’s financial structure will also be examined.
Future Retail’s liquidity status has deteriorated significantly since March 2020, worsened by India’s strict Coronavirus containment measures (Covid-19). Despite a nearly 70% drop in revenue, the company’s operating cash flows remain depressed.
Future Retail’s existing long-term debt commitments (term loans and non-convertible debentures) will be extended by 18-24 months at current interest rates from their original timeline. The non-convertible debentures will be repaid on June 30, 2025, and the term loans will be repaid beginning in December 2021.
Overdues on short-term working capital borrowings (including interest) will be converted into working capital term loans and funded interest term loans, which will be repaid beginning in December 2021. The restructured debt would not need interest or principal payments until September 2021, according to the firm.
