Lakshmi Iyer, CFA

Credit

We have examined  the impact of  change of control clauses across various companies' bonds (<a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> , <a href="https://www.smartkarma.com/entities/future-retail-ltd-4b025726-3be6-41e3-9f59-22ab2a17a8b2" target="_blank" data-smartkarma-citation="entities:26799:1" rel="noopener">Future Retail (FRETAIL IN)</a> and <a href="https://www.smartkarma.com/entities/car-inc" target="_blank" data-smartkarma-citation="entities:942:1" rel="noopener">Car Inc (699 HK)</a> in terms of market reactions and non-reactions.  Given the current scenario, we think investors should keep an eye on the stock prices of issuers as well as promoters' shareholding data, wherever possible.

We have examined  the impact of  change of control clauses across various companies' bonds (Softbank Group (9984 JP) , Future Retail (FRETAIL IN) and Car Inc (699 HK) in terms of market reactions and non-reactions.  Given the current scenario, we think investors should keep an eye on the stock prices of issuers as well as promoters' shareholding data, wherever possible.

Change of Control Clauses - Adding to Volatility

Senior Credit Analyst, Lucror Analytics

Trung Nguyen

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

We had a one-on-one call with Future Retail earlier yesterday. The liquidity situation is grim, while share-pledge issues continue to weigh on the credit. Liquidity is inadequate, with the company having almost zero cash and no undrawn credit facilities. The security on infrastructure assets has not been perfected, while the Change of Control issue due to share-pledged loans at the promoters' level remains an overhang. However, management is in talks to sell assets to cover the loan. We continue to see negative rating pressure.

 We had a one-on-one call with Future Retail earlier yesterday. The liquidity situation is grim, while share-pledge issues continue to weigh on the credit. Liquidity is inadequate, with the company having almost zero cash and no undrawn credit facilities. The security on infrastructure assets has not been perfected, while the Change of Control issue due to share-pledged loans at the promoters' level remains an overhang. However, management is in talks to sell assets to cover the loan. We continue to see negative rating pressure.

Future Retail - Event Flash - Investor Update - Lucror Analytics

<a href="https://www.smartkarma.com/entities/future-retail-ltd-4b025726-3be6-41e3-9f59-22ab2a17a8b2" target="_blank" data-smartkarma-citation="entities:26799:1" rel="noopener">Future Retail (FRETAIL IN) </a>is beset with liquidity risk, largely on account of the change-of-control covenant in its USD bond coupled with the promoters' pledged shareholding.  We are negative on credit quality and recommend "hold" on its USD bonds. We also recommend a solution for the current predicament.

Future Retail (FRETAIL IN) is beset with liquidity risk, largely on account of the change-of-control covenant in its USD bond coupled with the promoters' pledged shareholding.  We are negative on credit quality and recommend "hold" on its USD bonds. We also recommend a solution for the current predicament.

Future Retail Limited - High Liquidity Risks

Fitch downgraded the ratings of 3 Indian fincos on March 27 and placed one rating on negative watch. While we recognize the risks associated with the sector, these companies are among the sector's stronger players.  We feel the action is premature - a negative outlook would have sufficed at the current juncture,  in our view.

Fitch downgraded the ratings of 3 Indian fincos on March 27 and placed one rating on negative watch. While we recognize the risks associated with the sector, these companies are among the sector's stronger players.  We feel the action is premature - a negative outlook would have sufficed at the current juncture,  in our view.

Earlier this morning, Future Retail (FRL) hosted an investor update call. Our key takeaway is that the company's operational profile continues to be robust, but share pledges could become an issue for the group. Our fundamental Credit Bias on FRL is "Stable". We do not expect the company's post-restructuring leverage to change materially. However, deleveraging could occur if FRL is able to grow its earnings. In the near term, negative headlines on the share-pledged debt held by the promoters may weigh on the bond prices, but should have little impact on operations. We maintain our "Hold" recommendation on the FRETAI Notes.

 Earlier this morning, Future Retail (FRL) hosted an investor update call. Our key takeaway is that the company's operational profile continues to be robust, but share pledges could become an issue for the group.  Our fundamental Credit Bias on FRL is "Stable". We do not expect the company's post-restructuring leverage to change materially. However, deleveraging could occur if FRL is able to grow its earnings. In the near term, negative headlines on the share-pledged debt held by the promoters may weigh on the bond prices, but should have little impact on operations.  We maintain our "Hold" recommendation on the FRETAI Notes.

India

Future Retail Limited owns and operates supermarkets and hypermarkets. The Company offers consumer durable goods, fashion, food, electronics, and other products. Future Retail serves customers worldwide.

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Future Retail Ltd (FRETAIL IN)

Change of Control Clauses - Adding to Volatility

We have examined the impact of change of control clauses across various companies' bonds (Softbank Group (9984 JP) , Future Retail (FRETAIL IN)...

Lakshmi Iyer, CFA

Future Retail - Event Flash - Investor Update - Lucror Analytics

We had a one-on-one call with Future Retail earlier yesterday. The liquidity situation is grim, while share-pledge issues continue to weigh on the...

Lucror Analytics

Future Retail Limited - High Liquidity Risks

Future Retail (FRETAIL IN) is beset with liquidity risk, largely on account of the change-of-control covenant in its USD bond coupled with the...

Lakshmi Iyer, CFA

Fitch Downgrade of Indian Fincos

Fitch downgraded the ratings of 3 Indian fincos on March 27 and placed one rating on negative watch. While we recognize the risks associated with...

Lakshmi Iyer, CFA

Future Retail - Event Flash - Investor Update - Lucror Analytics

Earlier this morning, Future Retail (FRL) hosted an investor update call. Our key takeaway is that the company's operational profile continues to...

Lucror Analytics

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