Credit rating agency revises issuer rating following missed repayment on debt
S&P Global Ratings has downgraded the long-term issuer credit rating of India’s Future Retail from “CCC-” to “SD” (selective default) after the retail giant failed to meet its principal repayment obligation on domestic debt. The downgrade was announced on February 1, following the company’s inability to repay approximately 35 billion rupees due by December 31, part of a restructuring plan negotiated with onshore lenders in April of the previous year.
Despite this default, S&P maintained its “CCC-” rating on Future Retail’s US dollar-denominated bonds, which are listed on the Singapore Exchange. The agency expects the company to meet its semi-annual coupon payments within a 30-day grace period, consistent with its historical payment behaviour. These payments were due on January 24.
Future Retail’s failure to meet its financial obligations comes as it struggles with insufficient cash flows and an unsuccessful attempt to monetise its smaller stores. The company has been trying to sell its assets to competitor Reliance Industries, but this is hindered by a legal dispute with Amazon. Amazon has invoked clauses from its US$200 million investment to block the deal, citing breach of contract.
With 1,388 stores in over 400 cities, Future Retail’s future remains uncertain. If the Reliance acquisition falls through, the company could face liquidation, as reported by Reuters in October 2023.
