Fitch assigns Future Retail’s final rating at CCC+ on liquidity pressures

Mumbai (Maharashtra) [India], May 8 (ANI): Fitch Ratings has assigned Future Retail Ltd (FRL) a final long-term issuer default rating (IDR) of CCC-plus.
At the same time, FRL’s 500 million dollars 5.6 per cent senior secured notes due in 2025 have been assigned a rating of CCC-plus with a recovery rating of RR4.
“The final IDR and rating on the notes are one notch below our expected ratings of B-(EXP) assigned on April 2 due to the impact of coronavirus-related shutdowns on FRL’s liquidity,” it said in a statement.
“We have also removed the rating watch negative placed on the expected IDR on the same date. The final rating reflects that the majority of the cross-guarantees with fellow promoter group entity, Future Enterprises Ltd, have been extinguished.”
The final rating reflects the continued risks relating to FRL’s liquidity position as its business has been significantly affected by coronavirus-related shutdowns across India.
Fitch believes that FRL’s liquidity remains reliant on the early release of working capital facilities by relationship banks and various government emergency measures, including the Reserve Bank of India moratorium on interest and principal payments — due to expire on May 31 — and the COVID-19 Emergency Line of Credit.
Currently, FRL is only able to sell its lower-margin essential items which have led to monthly sales declining by around 75 per cent in March and April from normal levels and continues to limit FRL’s ability to generate cash to meet working capital requirements.
“However, we believe that expected future releases of working capital facilities and emergency lines are required to sustain the ongoing business and meet the payment of the coupon due on FRL’s 500 million dollars senior secured bond on July 22,” said Fitch. (ANI)