Asda has borrowed an additional £155m to help meet its mountain of debt obligations, as the embattled supermarket continues the battle to deleverage.
The supermarket revealed today it had successfully raised and allocated “a private £155m-equivalent fungible add-on” to one of its existing term loans. It means the new £155m loan was agreed on the same terms as the original borrowings.
Asda will use the funds, along with a similar amount from its balance sheet, to pay off debt due in 2025 and 2026.
The group said that, following on from a £3.2bn refinancing in May this year, all its near-term debt maturities had been pushed into the next decade.
“Asda remains focused on prudently managing the capital structure in the long term,” the group added. “The use of £155m of cash from the balance sheet further reduces gross leverage and is reflective of Asda’s cash generative nature and strong cash generation through FY24.”
The move follows a warning last week from ratings agency Fitch that Asda could be forced to refinance its entire capital structure ahead of a £900m repayment owed to former US owner Walmart by 2028. Fitch estimated the Walmart bill was made up of £500m for the US retailer’s remaining stake in Asda and another £400m in interest.
An Asda spokesman told the press that while the supermarket acknowledged Fitch’s view, it highlighted this was an opinion and not a statement of fact.
Fitch revised the outlook on Asda’s long-term issuer default rating from ‘positive’ to ‘stable’ to reflect the firm’s view that the pace of the supermarket’s profit growth was slower than expected following a steady loss of market share and a decline in like-for-like sales.
Asda has been weighed down with a huge debt burden since TDR Capital and the Issa brothers acquired the supermarket in a highly leveraged £6.8bn buyout in 2021.
It has struggled to perform ever since, with its market share declining from almost 15% to close to 12% this year.
Former boss Allan Leighton was parachuted into the business last month to take over the chairman role from Stuart Rose and front a turnaround attempt.
Asda’s net debt stood at £3.8bn at the end of its third quarter, which represented a £100m reduction on the previous three months.
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