Kishore Biyani-led Future Retail Ltd, which runs the Big Bazaar chain of stores, on Tuesday raised $500 million through dollar-denominated bonds.
The Future Retail board had approved the fundraising exercise on 4 January to finance the purchase of retail assets from group company Future Enterprises Ltd.
“Future Retail’s debut international bond has received strong investor interest from global debt capital market investors," said a person advising Future Retail on the bond offering. “International debt capital markets are exhibiting robust demand for quality credits," he added.
Banks that advised Future on the bond issuance include Deutsche Bank, Barclays, UBS and others.
“The Future Retail bonds witnessed a demand of almost six times the issue size," said another banker, who did not wish to be named.
On 12 October, the company said it will acquire retail infrastructure assets of Future Enterprises in one or more tranches, through direct purchase, acquisition through slump sale or any other mode as mutually acceptable between the two firms. These retail assets are valued at around ₹4,000 crore.
“The board has reconsidered the various funding options for the acquisition of the retail infrastructure assets and found it more efficient to fund the same through the USD denominated borrowings and accordingly, approved raising of long-term funds for the company subject to the applicable regulatory approvals and market conditions, through the offer, issue and of allotment of senior, secured USD-denominated notes for an aggregate amount not exceeding $500 Million to be issued in one or more tranche(s), to one or more eligible lenders/investors," the company told stock exchanges on 4 January. The restructuring will save Future Retail about ₹650 crore of lease rental payments annually, thus bringing down the company’s debt to Ebitda ratio from 2.4 times as of fiscal year 2019 to about 1.5 times by April 2021 and less than 0.2 times in the next three years, resulting in stronger operating cash flows and sustained Ebitda growth.
The decoupling would help reduce inter-corporate linkages between entities of the Future group, simplifying its structure. It would also result in cessation of the corporate guarantee of about ₹3,600 crore from Future Retail to the lenders of Future Enterprises. Future Retail operates Biyani’s popular retail chain of Big Bazaar and other smaller format retail outlets under EasyDay and Heritage Fresh.