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Asda plans to raise more than £2.6bn to refinance a chunk of its debt, after the UK supermarket unveiled results which showed adjusted profits jumped by roughly a quarter last year.
Britain’s third-largest supermarket has been burdened with high levels of debt since the billionaire Issa brothers bought it together with private equity firm TDR in a £6.8bn deal three years ago.
The UK grocery chain, which was previously owned by the US group Walmart, is taking advantage of a rebound in corporate debt markets to extend the maturities on borrowings due in 2026.
Asda has started marketing a €1.05bn term loan to investors and plans to raise a further £1.75bn of debt, according to terms seen by the Financial Times. The new loan will mature in 2031.
Investors said the £1.75bn was likely to take the form of a bond deal to be announced in the coming days. Asda declined to comment on its refinancing plans.
Both revenues and adjusted earnings climbed last year, Asda said on Monday, as the group’s low-cost range Just Essentials and the launch of its loyalty app helped drive sales during a cost of living squeeze.
Adjusted earnings after rent, the company’s preferred profit measure, rose 24 per cent to £1bn, while revenues increased 7.1 per cent to £21.8bn and like-for-like sales climbed 5.4 per cent. Asda declined to provide a figure for pre-tax profits.
Sales momentum slowed in the second half of the year, however, and despite the uptick in sales, industry data show that Asda has consistently underperformed its bigger rivals Tesco and J Sainsbury.
Clive Black, a retail analyst at Shore Capital, said: “Commendable debt reduction is important and will ease pressure on Asda, but it is ceding a lot of grocery market share in the search for short-term cash.”
The results come as the Issa brothers, who also co-own petrol station empire EG Group with TDR, seek to simplify the division of assets between them.
EG Group said last month that it was in talks to offload some UK assets to Zuber Issa in what the company told investors was an attempt to reduce the debt of its petrol station empire.
Mohsin Issa previously dismissed speculation about a rift with his brother. Asda on Monday declined to comment on reports that Zuber Issa was in talks to offload his 22.5pc share in the grocery chain to TDR.
Mohsin Issa, who has been running Asda but intends to relinquish day-to-day control when a chief executive is found, said Asda was a “powerhouse built on rock-solid foundations”.
Asda had net debt of £3.8bn at the end of 2023, with more than 90 per cent secured on fixed rates of interest. The company said it was “fully committed to further deleveraging” after its finance costs rose to £225mn, from about £185mn in 2022.
