Banks mull finance deal for supermarket buyout
ONE IN four employers expects to make permanent redundancies due to the coronavirus crisis, research suggests.
A survey of 300 human resources managers found that one in five had asked staff not classed as essential workers to still attend their place of work.
The report, by the Chartered Institute of Personnel and Development (CIPD) and People Management magazine, said many employers have found the Government’s classification of essential and key workers confusing.
Over half of those surveyed said they will look to furlough staff under the Government scheme to pay 80 per cent of wages, and a similar number had frozen recruitment.
The CIPD urged employers to look at all options before making redundancies to help protect employees’ livelihoods and the future of their businesses.
Ben Willmott, head of public policy at the CIPD, said: “This survey shows that many businesses are already considering redundancies, rather than utilising the Government’s Job Retention Scheme during the crisis.”
BANKS ARE considering raising up to £3.5bn of underwritten debt to back a potential buyout of Leeds-based supermarket Asda.
A report from Reuters quoted banking sources which suggested that Asda’s owner, US retail giant Walmart, is close to selling and that banks are assessing appetite for a “jumbo deal” in light of the coronavirus pandemic.
Walmart is understood to have been in discussions with potential buyers Apollo, Lonestar and TD&R for some time and is set to make a decision shortly on whether they will push on and get the deal done or put the process on hold.
Walmart has been looking to sell a portion of Asda after it failed to merge it with Sainsbury’s last year.
Sponsors have held talks with banks about financing a stake in Asda, led by chief executive Roger Burnley, and there is said to be a willingness from a large number of banks to try and do the deal and get the pipeline going.
A senior banker said: “Sponsors are approaching banks about whether a financing is possible and banks are trying to work through it.
“Although primary is notionally shut, if something were to
The chief executive of Asda. The firm could be sold by its owner Walmart.
come with a significant yield it could get done.” A second senior banker said: “Everyone in the market is looking at it.”
Any finance deal could prove problematic in the current climate as risk-adverse lenders have all but stopped underwriting leveraged financings due to the coronavirus.
Jumbo buyouts are backed with underwritten commitments of debt from banks, which are then sold in a syndication process to a wide number of investors including collateralised loan obligations (CLOs) and credit funds.
With investors focused on their current portfolios, it could be risky for banks to take on such a commitment without knowing who the end buyers are and at what levels they would be willing to buy.
Several deals that were underwritten and due to launch for syndication in March, including a €1.5bn financing backing Lonestar’s acquisition of BASF’s construction chemicals business and a €520m leveraged loan for Ardian’s acquisition of Cerelia, a French company that makes pizza dough and cookies, were delayed.
Bankers would need to seek approval from intrinsically risk adverse credit committees for around triple Asda’s approximate £1.2bn post-tax earnings.
“Because it is very large and sterling this is not a maximum leverage deal and the ask is going to be circa 3 to 3.5 times. If coronavirus wasn’t around it could sustain higher than that. Credit committees right now are exceptionally cautious because of the volatility and unpredictability of the underlying markets,” the first senior banker said.
Asda and Walmart were not immediately available for comment. Asda and Walmart said in a joint statement on February 26 that discussions with “a small number” of suitors followed “inbound interest” but no decisions had been taken.