“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,” it said.
The company has indicated to the rating firm that it would make the coupon payment within the grace period by improving operating cash flow through bank funding, or arranging for alternative sources of funding, including the sale of certain assets.
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,” said the rating firm.
The rating is preliminary due to the cross-guarantees between Future Retail and its group firm, Future Enterprises, have not been fully released, with about 20 per cent still pending.