Asda refinances debt: British supermarket chain Asda has successfully refinanced more than £3.2 billion ($4.0 billion) of its debt, extending the majority of its repayment deadlines into the next decade, the company announced on Friday.

Asda, which ranks as the third largest grocery retailer in the UK, is currently owned by brothers Zuber and Mohsin Issa along with the private equity firm TDR Capital.

Asda's debt challenge

Since the Issa brothers and TDR acquired Asda from Walmart in a £6.8 billion deal back in 2020, the supermarket has grappled with significant debt levels. This move to refinance its debt is aimed at alleviating some of that financial burden. Notably, Walmart still retains a 10% stake in Asda following the acquisition. As of 2023, Asda's interest costs amounted to £225 million.

Michael Gleeson, Asda's Chief Financial Officer, highlighted the strong investor interest in the refinancing initiative, attributing it to the company's strategic and cautious approach in addressing its debt well in advance of looming repayment deadlines. He also pointed out that Moody's recent upgrade of Asda's corporate rating bolstered investor confidence.

Asda's sales decline

Despite reporting a notable 24 per cent increase in earnings to over £1 billion in 2023, Asda continues to face challenges in the market. Recent industry data indicates that the supermarket is losing market share to competitors such as Tesco and Sainsbury's. According to market research firm NIQ, Asda's sales declined by 0.9 per cent over the 12-week period ending April 20, with its market share decreasing by 70 basis points compared to the previous year.

(With Reuters Inputs)