// Asda’s owners have launched a review of the grocer’s £8.6bn property estate in a bid to reduce growing debt
// The Issa brothers are understood to be targeting the sale and leaseback of Asda’s sites
Asda’s billionaire owners have kicked off a review of the supermarket’s £8.6bn property estate in a bid to combat its piling debt.
The Issa brothers are pursuing the sale and leaseback of the supermarket’s store estate to reduce surging interest bills.
According to The Telegraph, property experts have been drafted in to assess the prospects for the grocer’s estate, which was valued at £8.6bn in Asda’s 2021 annual report.
Subscribe to Retail Gazette for free
Sign up here to get the latest news straight into your inbox each morning
It is understood that the Issa brothers expect to keep a sizeable “underpin” of freehold properties even if many of the sites are sold and leased back from investors.
The Issa brothers, backed by private equity firm TDR Capital, acquired Asda in a £6.8bn debt-fuelled deal from Walmart.
However, rising interest rates and the cost-of-living crisis have piled on pressure to pay down the debt.
A sale and leaseback of Asda properties could solve the problem of reducing interest payments but could risk another of paying higher rent.
The Issa brothers have also been looking to reduce the growing debt burden of its EG Group.
Last week, it was revealed that EG Group had sold 415 store assets on the US east coast in a sale and leaseback deal worth $1.5bn.
Commenting on the sale, co-chief executive Zuber Issa said: “[The] announcement demonstrates the progress we continue to make to put in place a robust capital structure for the medium term that will underpin our long-term strategy and represents an important first step in this process.”
Click here to sign up to Retail Gazette‘s free daily email newsletter
4 Comments. Leave new
So, it was about asset stripping all along.
absolute snakes. same as morrisons buy it, sell it off, crooks
Sir Philip Green eat your heart out.
The awareness that restructuring of capital is a mechanism for future development is welcome.
Too many businesses fail to attend to the essentials. The debt equity ratio however remains exceptionally high and the sale and leaseback model has significant volatilities particularly in current rental markets. Would not be surprised if there are potential defaults and this is then leveraged to secure more favourable terms ongoing as a strategy. The weaponisation of rent. Not pleasant and probably not honourable but few businesses operate with such fundamental principles. Time will tell.