Negative liens that restrict dividend payments to the owners of Future Retail (FRL) protect bondholders, but the encumbrance of part of the promoters’ shareholding to secure debt taken out at the promoter level could trigger a change of control event on the firm’s $500-million 5.6% senior secured bond due 2025 in the event of default by the promoters, Fitch Ratings said on Monday.
“We also believe attempts to monetise assets over the previous few years within the promoter group and the implementation of maximum encumbrance targets on FRL shareholdings shows that the promoters intend to limit interdependency and risk,” Fitch said in a report. According to the report, FRL disclosed that the value of debt issued by the promoter group, which is encumbered by FRL shares, was Rs 2,730 crore as on March 6, 2020.
