Supermarket giant Asda has refinanced most of its considerable debt pile thanks to ‘strong demand’ from investors.
The firm said it finalised refinancing on over £3.2billion of its £3.8billion debt, which was mainly accumulated when the Issa brothers and private equity giant TDR Capital bought the group for £6.8billion three years ago.
The deal includes the largest high-yield bond this year and the second-biggest sterling bond in the European leveraged finance market.
Liabilities: Asda’s debts were mainly accumulated when the Issa brothers and private equity giant TDR Capital bought the group for £6.8billion three years ago
As part of the refinancing, Asda used around £300million of cash to reduce gross debts while raising £1.75billion of bonds and upping the amount on a term loan by more than £200million to £1.1billion.
These lending arrangements will pay higher interest rates but do not need to be repaid until 2030 and 2031.
Asda has also expanded its revolving credit facility from £667million to £748million and extended the maturity on this loan by over three years to October 2028.
Michael Gleeson, chief financial officer of Asda, said: ‘We saw strong demand from investors after taking a thoughtful and prudent approach to refinancing our near-term debt well ahead of maturities – to further strengthen our balance sheet.
‘The refinancing also reflects the wider strength of Asda as a diversified retail group with a strong grocery business at its core.’
Asda’s restructuring comes at a time of high borrowing costs that mean the group is paying hundreds of millions in interest payments each year.
At the same time, shoppers are flocking to German discount chains Aldi and Lidl amidst widespread cost-of-living pressures caused partly by elevated energy prices.
Last month, market research group Kantar revealed Asda’s sales dipped by 0.4 per cent year-on-year in the 12 weeks to April 14, making it the worst-performing among all the major supermarkets.
Asda’s like-for-like revenues slowed during the second half of last year as it struggled to hold onto customers.
However, the Leeds-headquartered company still saw turnover increase by 7.1 per cent to £21.9billion even though it slashed prices on hundreds of popular products.
Its adjusted earnings before nasties also climbed by nearly a quarter to £1.1billion, while the group’s leverage declined to three times underlying profits.
Because of Asda’s strong performance, ratings agency Moody’s recently upgraded the firm’s corporate rating from B1 to B2.
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