Fitch upgrades Pantaloon's short-term debt

Rating agency Fitch today upgraded Kishore Biyani promoted Pantaloon Retail India's (PRIL) short-term debt instruments, against the backdrop of recent restructuring of the company and its improved liquidity.

Fitch also retained rating of Pantaloon at A-, two notches below the highest grade, and said the company need no longer be put on watch list for downgrade as there is now clarity on the company's final terms and conditions of its ongoing restructuring.

Besides, Fitch assigned A- rating to Pantaloon's new, wholly-owned subsidiary, Future Value Retail Ltd (FVRL) as part of the restructuring.

In January, PRIL spun-off its value retailing business -- including the 'Big Bazaar' and 'Food Bazaar' retail formats -- and transferred it to FVRL.

Following this restructuring, PRIL's debt would be split between PRIL and FVRL, which now constitutes 70 per cent of Pantaloon's revenues.

Fitch said the company is in the process of finalising the transfer of bank debt, and expects that around 65 per cent of PRIL's total debt will be transferred to FVRL by April 2010.

It added, "The company has used a combination of prepayments and the raising of fresh, longer maturity loans to lengthen its overall debt maturity profile."

While Fitch upgraded Pantaloon's short-term loans worth Rs 290 crore, it retained rating of the company's long-term loans of Rs 2,353.25 crore and non-convertible debenture (NCD) of Rs 250 crore. It also retained rating of PRIL's working capital limits of Rs 1,875 crore.

Fitch said, "These ratings reflect PRIL's improved liquidity position following its INR 5 bn (Rs 500 crore) equity infusion in November 2009, a part of which has been used to reduce debt."

It said that despite a challenging operating environment PRIL continues to report higher sales growth and better operating profits, relative to its peers.