Future Retail downgraded to restricted default by Fitch Ratings

Restructuring a bulk of its onshore debt has led to Future Retail’s long-term issuer default rating being downgraded from distressed to restricted default by Fitch Ratings. Fitch affirmed the rating on Future Retail‘s $500 million 5.6 per cent senior secured notes due 2025 at ''distressed' with a recovery rating of 'RR5.

The Distressed Debt Exchange provides relief on debt servicing requirements until September 30 but the resultant debt structure and maturity profile remain unsustainable. Fitch believes, FRL restructuring does not meaningfully address its financial stress, which is essential for its upgrade after the completion of the DDE.

Fitch said the resurgence of coronavirus in India and FRL's poor access to credit will make it difficult for the company to meet the interest payments on debt that was not part of the restructuring, particularly the US-dollar notes.

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 as agreed in the restructuring plan.