Leeds-based Asda refinances £3.2bn of debt with higher interest rates

It will pay higher interest rates on the new bonds, the retailer said.

Asda had net debt of £3.8 billion at the end of 2023, having built up the debt pile through its £6.8 billion takeover by the billionaire Issa brothers and private equity firm TDR Capital in 2021.

As part of the refinancing, the UK’s third largest grocery chain said it also used £300 million of cash from its balance sheet to reduce its gross debt.

The retailer also extended increased its revolving credit facility from £667 million to £748 million and extended its maturity by over three years to October 2028.

It comes after influential credit agency Moody’s upgraded its rating for Asda last month.

Michael Gleeson, Asda’s chief financial officer, said the move is a positive step for the business.

“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 swelled by a quarter last year with growth in food and clothing sales.

It said its underlying earnings, before additional costs like tax and interest, rose by 24 per cent to £1.1 billion over 2023, compared with 2022.

Supermarket sales, excluding fuel, grew 5.4 per cent on a like-for-like basis, which excludes the impact of new stores opening during the year.

Mr Gleeson said last week that price rises helped drive higher sales through the year as the retail industry experienced “significant inflation”.

“Inflation has reduced significantly into the beginning of 2024 – it still isn’t back to where it was maybe three to 10 years ago, but it has reduced,” he said.

Mr Gleeson said last week that the chain had “tried very hard to protect customers from the worst impacts” of inflation, including by pledging to match the prices of hundreds of items to those sold at rivals Aldi and Lidl.

At the start of the year, Asda saw its share of the grocery market slip to about 13.6 per cent, trailing behind traditional supermarket rivals Sainsbury’s and Tesco, and as German discounters Aldi and Lidl continued to grow their customer base, according to data from Kantar.

The firm said this week it was making new price cuts on 126 essential items worth £70m.

The refinancing announcement also comes amid reports that Zuber Issa is in talks with TDR Capital about selling them his roughly 22 per cent stake in Asda.