Fitch assigns Future Retail, notes BB

Fitch Ratings said it published Future Retail Ltd.’s expected long-term foreign-currency issuer default rating of BB. The outlook is positive. The agency also assigned the proposed senior secured dollar-denominated bond to be issued by Future Retail Ltd., an expected rating of BB.

The rating is expected since the rating analysis is based on the restructured Future Retail entity. Under the restructuring, the company will buy the in-store infrastructure assets it currently leases from Future Enterprises Ltd. for Rs. 40 billion. The purchase will be funded by Rs. 15 billion in additional equity the main shareholders have committed to contribute and the combination of the company’s internal accruals, security deposits paid to Future Enterprises under the lease rental arrangements, and borrowings, including a proposed benchmark-sized senior secured bond.

As part of the restructuring, the cross-guarantee arrangements between Future Retail and Future Enterprises will cease upon payment of the proceeds of the bond for the assets to be acquired and Future Enterprises using the funds to repay debt with the cross-guarantees, the agency said.

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