NEW DELHI: Kishore Biyani-led Future Retail has sought re-opening of its credit line to save the company from a major debt crisis. Amid rising debt and a deteriorating business environment due to the
Covid-19 pandemic, Future Retail has defaulted on payment of about Rs 100-crore interest on foreign bonds leading to S&P Global Ratings warning that it would downgrade the retail firm to default category after 30 days.
To avoid payment default, the company is also looking at advancing talks with the country’s richest man Mukesh Ambani to sell part of its retail empire including its flagship Future Retail, said a source. “Due to the nation-wide lock down imposed to restrict the spread of COVID-19 pandemic, and consequent restricted business operations of the company the liquidity position has been affected causing us to miss the service of the payment of interest due on the USD Notes (listed on Singapore Stock Exchange) on 22nd July, 2020,” the company said in the exchange filing.
Technically, a payment default has not yet occurred under the indenture governing the notes, which provides a 30-day grace period, the rating firm said. “However, we could lower our preliminary rating on Future Retail to ‘D’ if we feel the company is unlikely to meet its commitment within this grace period. Even if Future Retail makes the coupon payment within the grace period, its weak liquidity will remain an overarching credit risk,” warned S&P. The firm also expects its liquidity to improve with a potential equity recapitalisation, which could bring in a strategic investor. “However, our rating does not factor in such transactions because of limited clarity at this time,” the rating firm added.