S&P Global Ratings downgraded Future Retail Limited’s long-term issuer credit rating from ‘CCC-’ to ‘SD’. This comes after the company failed to repay the principal amount on its debt of ₹3,500 crore.
Future Retail failed to make the principal payments due on its restructured onshore bank borrowings on December 31, 2021. The company was allowed a review period of 30 days to cure the default. Future Retail failed to cure the default amid an unsuccessful attempt to monetise its small format stores and insufficient cash flows to meet the sizable repayment obligation.
On Wednesday, in a statement, S&P said, “We lowered the issuer credit rating on Future Retail because the company failed to repay the principal on its onshore debt, even within the review period allowed by Reserve Bank of India. A principal repayment of about w₹3,500 crore as due on December 31, 2021, on the company’s bank borrowings as part of a one-time restructuring plan implemented by the onshore lenders in April 2021.”
It further said that it had affirmed the issue rating on Future Retail’s $500 million senior secured notes because “we expect the company to service the semi-annual coupon during the 30-day grace period--in line with past trends.” The coupon was due on the notes on January 24, 2022.
Future Retail is an India-based retailer with about 1,388 stores across more than 400 cities.
The Kisore Biyani-led company has been facing acute cash crunch since 2020. The Covid-19 pandemic worsened situations for the retail company, post which it had agreed to sell its assets to Reliance Retail in August 2020.
Reliance had said that it would acquire the retail and wholesale business as well as the logistics and warehousing business of Future Group for ₹24,731 crore.
The completion of the deal has been delayed by legal issues between Amazon and Future Group. Amazon had claimed that when it entered in a deal with Future Group’s Future Coupons Private Limited in 2019, it had put a clause stating that Future Retail could not enter into a deal with restricted companies including Reliance.
Amazon later dragged Future Group into arbitration where it was awarded an interim relief in its favor. Amazon then moved Indian courts to implement the said order which was challenged by Future Group.
In October last year, the independent directors and trade body, CAIT had moved a complaint with the Competition Commission of India (CCI) regarding the said 2019 deal. The CCI had later put the deal into abeyance.
Recently, Amazon had offered to invest into Future Grup which was rejected by the company. Future Group had meanwhile approached the SC to seek relief. In a recent development, the Supreme Court has passed an order directing the High Court to hear the matter in full, set up a special bench and dispose the case at the earliest.