S&P lowers Future Retail rating on liquidity position

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Published: April 24, 2020 12:01 AM

Future Retail’s disbursement of approved credit lines from banks has been further delayed. This includes enhanced working capital credit lines of about Rs 2,125 crore, which were expected to be available in April 2020.

Total debt of Future Retail stood at Rs 3,841 crore as on December 2019, shows data from Bloomberg.

S&P Global Ratings on Wednesday lowered its preliminary long-term issuer credit rating on Future Retail and the preliminary long-term issue rating on the company’s $500-million senior secured notes to ‘CCC-’ from ‘B-’. The rating action was lowered because S&P believes that Future Retail’s liquidity position has weakened due to the extended lockdown in the country due to the novel coronavirus.

In March, the Bombay High Court had given relief to the Future Group company and restrained IDBI Trusteeship Services from selling the pledged shares in Future Retail until further orders. Future Corporate Resources and Rural Fairprice Wholesale had approached the court to restrain IDBI Trustee from selling the pledged shares. Future Retail’s share price has fallen from Rs 350 on the date of transaction to Rs 303 at the start of March, a senior counsel had argued in court on behalf of the Future Group. On Thursday, the price of Future Retail closed at Rs 98.40, up by 4.96% on BSE.

Last week, Future Group also got relief from the Supreme Court as it refused to interfere with the Bombay High Court order that restrained IDBI Trusteeship and UBS Bank from selling the pledged shares in Future Retail until further orders. The Bombay High Court will be hearing the case on May 4. Total debt of Future Retail stood at Rs 3,841 crore as on December 2019, shows data from Bloomberg.

S&P Global Ratings on Future Retail remained on CreditWatch negative to reflect the company’s weakening debt-servicing ability and the likelihood that Future Retail or its related entities will restructure its debt within the next few months. “The India-based retailer’s ability to meet its upcoming financial obligations is dependent on an improvement in business conditions or access to additional lines of credit,” said S&P Global in its press release.

Future Retail’s disbursement of approved credit lines from banks has been further delayed. This includes enhanced working capital credit lines of about Rs 2,125 crore, which were expected to be available in April 2020. In addition, the company is proposing to avail its Rs 650 crore peak-season working capital credit line to support its liquidity.

“We understand that the delays in disbursement are due to procedural issues during the lockdown and the company now expects them to be available by May 2020. We expect these credit lines to be sufficient to meet the company’s immediate funding requirements, should they become available. Timeliness remains critical,” explained the rating agency.

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