- Asda racked up most of its debt after being bought for £6.8bn in 2021
- The group has expanded its revolving credit facility from £667m to £748m.
Supermarket giant Asda has refinanced most of its considerable debt thanks to “strong demand” from investors.
The firm said it had completed the refinancing of more than £3.2bn of its £3.8bn debt, which was mainly accrued when the Issa brothers and private equity giant TDR Capital bought the group for £6.8bn three years ago.
The deal includes the largest high-yield bond this year and the second-largest sterling bond in the European leveraged finance market.
Liabilities: Asda’s debts were mainly piled up when the Issa brothers and private equity giant TDR Capital bought the group for £6.8bn three years ago.
As part of the refinancing, Asda used around £300m of cash to reduce gross debt, while raising £1.75bn in bonds and increasing the amount of a term loan by more than £200m. up to £1.1 billion.
These loan agreements will pay higher interest rates, but will not need to be repaid until 2030 and 2031.
Asda also expanded its revolving credit facility from £667 million to £748 million and extended the maturity of this loan by more than three years to October 2028.
Michael Gleeson, Asda’s chief financial officer, said: “We saw strong demand from investors after taking a thoughtful and prudent approach to refinancing our short-term debt well ahead of maturities, to further strengthen our balance sheet.”
“The refinancing also reflects Asda’s overall strength as a diversified retail group with a strong grocery business at its core.”
Asda’s restructuring comes at a time of high borrowing costs which 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 amid widespread cost-of-living pressures caused in part by high energy prices.
Last month, market research group Kantar revealed Asda’s sales fell 0.4 per cent year-on-year in the 12 weeks to April 14, making it the worst performer among all major supermarkets.
Asda’s like-for-like revenue slowed during the second half of last year as it struggled to retain customers.
However, the Leeds-based company still saw turnover rise by 7.1 per cent to £21.9bn, despite slashing prices on hundreds of popular products.
Its adjusted profits before the unpleasantries also rose by almost a quarter to £1.1bn, while the group’s leverage fell to three times underlying profits.
Due to Asda’s good performance, rating agency Moody’s recently raised the company’s corporate rating from B1 to B2.
