Fitch downgrades Future Retail's rating to 'RD' on DDE; Stock slips 1%

At the same time, Fitch has affirmed the rating on FRL's USD500 million 5.6% senior secured notes due 2025 at 'C', with a Recovery Rating of 'RR5'.

May 03, 2021 10:05 IST India Infoline News Service

Fitch Ratings has downgraded Indian retailer Future Retail Limited's (FRL) Long-Term Issuer Default Rating (IDR) to 'RD', from 'C', following the company's announcement that it has completed the restructuring of the bulk of its onshore debt, which Fitch views as a distressed debt exchange (DDE).

At the same time, Fitch has affirmed the rating on FRL's USD500 million 5.6% senior secured notes due 2025 at 'C', with a Recovery Rating of 'RR5'.

According to the Company Rationale, "The DDE provides relief on debt servicing requirements until 30 September 2021, but we believe the resultant debt structure and maturity profile remain unsustainable. Therefore, we regard the relief as another temporary measure following the relief provided under India's central bank pandemic-related schemes last year.

The restructuring does not meaningfully address FRL's financial stress, which we regard as essential for an upgrade after the completion of the DDE."

The company will also need to rely on alternative sources, such as new equity partners and disposals, to meet its large debt repayments after September 2021, as agreed in the restructuring plan.

At around 10:27 AM, Future Retail was trading at Rs50.75 per piece down by Rs0.4 or 0.78% on Sensex.

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