Asda refinances £3.2bn of debt at higher rate buoyed by 'strong' investor demand

Asda has completed a refinancing of £3.2 billion of debt

Asda has refinanced £3.2billion of its debt, buoyed by “strong demand” from investors, the supermarket giant revealed on Friday.

The retail giant confirmed it has sealed refinancing agreements for the debt, extending the maturity dates well beyond 2030. In the process, Asda will be shouldering higher interest rates on these new bonds, the company acknowledged.

At the close of 2023, Asda was saddled with net debts totalling £3.8billion, having accumulated this sum following its £6.8billion acquisition by tycoon siblings, the Issa brothers, and TDR Capital back in 2021.

As part of the refinancing, the UK’s third-largest grocer also used £300million from its own reserves to reduce its gross debt. Moreover, Asda has beefed up its revolving credit facility, boosting it from £667million to £748million, and protracting its expiry date by over three years to October 2028.

This refinancing follows a ratings upgrade for Asda by the credit agency Moody’s last month. Asda’s chief financial officer, Michael Gleeson, commented: “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 supported by a fantastic non-food offering in George and following recent investments, a major presence in the high-growth convenience and food-service markets.”

Last week, Asda revealed its underlying earnings grew by 25% last year thanks to increased sales in food and clothing. The company announced that its earnings before tax, interest and other extra costs, had risen by 24% to £1.1billion in the year of 2023, compared to the previous year, 2022.

Excluding fuel, supermarket sales climbed 5.4% on a like-for-like basis, disregarding the opening of new stores throughout the year. Reports suggest that Zuber Issa is potentially discussing selling his approximately 22% stake in Asda to TDR Capital, amidst this refinancing.