In a pivotal update, Asda, the leading UK value supermarket and proud owner of the George brand, grapples with escalating challenges tied to its substantial £4.2 billion debt. As the interest rate landscape shifts, the company foresees a surge in its interest bill, reaching £426 million by February. This financial twist follows the £500 million loans transition from fixed to floating rates, intensifying pressure on the supermarket already under private equity ownership.
Asda’s Chief Financial Officer, Michael Gleeson, divulged these financial intricacies during a session with the government’s Business & Trade Committee. The impending interest rate adjustment is a direct outcome of the hefty debts incurred during the 2021 acquisition of Asda. The acquisition, orchestrated by the Issa brothers alongside private equity firm TDR in a monumental £6.8 billion takeover, has since sparked concerns among MPs about the potential hindrance high borrowing levels might pose to passing on reduced prices to consumers.
During the committee session, Gleeson and Mohsin Issa sought to address these concerns. Issa emphasized the robustness of Asda’s finances, affirming the supermarket’s ability to cover its debt obligations. He underscored, «The debt leverage at the start of the year was at 4.2 times, that has gone down to 3.8 times, and that trajectory is to go down even further by the end of this year. The business is highly cash generative, allowing us to invest in colleague pay, customer pricing, and loyalty.»
As the supermarket navigates these financial waters, the broader implications on consumer pricing and the retail landscape remain in focus.
