Covid-19: Future Lifestyle seeks recast of payment to operational creditors

The sharp fall in the share price of listed group entities has impacted the overall financial flexibility of the group and restricted the ability to raise further capital
Future Lifestyle Fashions is seeking ad-hoc working capital limits from lenders to enhance liquidity as the temporary closure of outlets during the lockdown triggered by coronavirus disease (Covid-19) has hit cash flows. It is also negotiating with operational creditors to restructure terms of payment.

CARE Ratings revised the outlook on Future Lifestyle Fashions’ long-term loans from “positive” to “negative”. Its rating is ‘AA-’ . The sharp fall in the share price of listed group entities has impacted the overall financial flexibility of the group and restricted its ability to raise capital.

The reaffirmation of Future Lifestyle Fashions’ ratings derives strength from the vast experience of its promoters (Future Group) in the retail industry, established pan-Indian presence of operationally profitable formats, healthy same-store sales growth and established portfolio of own and licensed brands.

The rating strengths are, however, tempered by moderate return on capital employed, high operating cycle, coupled with susceptibility to economic cycles and increasing competition in the fashion retail industry.

Future Lifestyle Fashions manages the lifestyle fashion business and has a portfolio of brands covering menswear, women’s wear, footwear, and accessories. As on December 31, 2019, the firm had 354 stores, covering an area of 7.3 million square feet.

The company has adequate liquidity in the near term, despite the impact of the lockdown on the firm’s ability to generate cash flows. It has applied to lenders asking for a moratorium on payments in accordance with the relief package (announced by the Reserve Bank of India on March 27) and its approval is under process. The firm is also looking to enhance working capital limits to augment its liquidity position.

According to a discussion with the management, the company has access to need-based support from its PE investors, should the situation arise. In addition, the company is looking to postpone lease rentals and is also taking other cost control initiatives. Further, it is in discussion with banks for the sanction of ad-hoc working capital limits.

The company has short-term financial liabilities and term loan repayments of Rs 121 crore due in financial year 2020-21 (FY21). In addition, non-convertible debentures of Rs 350 crore falling due on November 9, 2022, carries put/call option in FY21 and FY22. The company plans to refinance these NCDs. Timely and adequate fund infusion from investors/promoters remains critical for the company’s credit profile, CARE said.

S&P downgrades Hero FinCorp to ‘BB+/B’

Standard and Poor’s (S&P’s) has lowered its long-term and short-term issuer credit ratings on Indian financial services company Hero FinCorp Ltd from 'BBB-/A-3' to 'BB+/B'. The outlook on the long-term rating is stable. Rating has been downgraded as financially stronger parent Hero MotoCorp’s ability to support the rating on Hero FinCorp has diminished, although its willingness remains unchanged, S&P said.

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