S&P downgrades issuer rating of India's Future Retail to 'SD' amid default

S&P Global Ratings on Tuesday (Feb 1) downgraded the long-term issuer credit rating of India's Future Retail from "CCC-" to "SD", after the retail group failed to repay the principal on its onshore debt.

Concurrently, S&P affirmed its "CCC-" long-term issue rating on Future Retail's US dollar-denominated notes, which are listed on the Singapore Exchange.

Future Retail was due to repay a principal of about 35 billion rupees on its bank borrowings by Dec 31, as part of a one-time restructuring plan by onshore lenders in April last year. It was given a review period of 30 days after defaulting, but still failed to make the payment.

The default came amid Future Retail's unsuccessful attempt to monetise its small format stores and insufficient cash flows to meet the sizable repayment obligation, S&P noted.

Future Retail has wanted to sell its retail assets to rival Reliance, but this is hanging in balance due to a legal dispute with Amazon. The e-commerce giant has used the terms of its US$200 million investment in Future Retail to block the attempt, over allegations of breach of contract.

Despite the issuer rating downgrade, S&P still affirmed the notes' rating, as it expects Future Retail to service the semi-annual coupon within a 30-day grace period, in line with past trends. The coupon was originally due on Jan 24.

Future Retail has 1,388 stores across more than 400 cities. The company could go into liquidation if the Reliance deal fails, Reuters reported in October last year.