Issa brothers plan sale of Asda properties to pay debts
ASDA has kicked off a review of its £8.6bn property estate as its owners e x pl ore opti ons to r e duce t he supermarket’s costly debt.
The billionaire Issa brothers, flanked by private equity backers TDR Capital, are targeting the sale and leaseback of Asda’s supermarket estate to combat soaring interest bills.
Market sources said property experts have been called in to assess the prospects for the supermarket’s estate. Freehold properties were valued at £8.6bn, according to Asda’s 2021 annual report. Asda Group is yet to file its 2022 annual report with Companies House.
It is understood that Asda’s owners expect to retain a sizable “underpin” of freehold properties even if many of its sites are sold to investors and then leased back.
The Issas and TDR shocked the City two years ago by acquiring Asda in a £6.8bn debt-fuelled deal in which they injected only £800m in equity.
Since then the cost of living crisis and rising interest rates have piled pressure on the business and paying down debt has become a priority in recent months.
However, a sale and leaseback could solve one problem but risk another by reducing interest payments in exchange for higher rent.
It emerged in January that one option under review was a potential merger of Asda with the UK arm of EG Group, the petrol station business that made the Issas’ fortune. Such a move would be likely to attract close scrutiny from competition regulators, however.
The Issas are also seeking to ease the burden of their debt-fuelled deal-making on EG Group itself.
Lenders were told last week that discussions to sell off parts of the company were “well advanced”, City sources said.