The transactions have involved four of its supermarkets (Small Heath, Colindale, Coventry Abbey Park, and Killingbeck) being sold to DTZ Investors and leased back, and 20 stores and its Lutterworth distribution depot being sold to Blue Owl Capital and leased back.
All properties are subject to 25-year lease agreements, with an option to renew for an additional 10 years.
The struggling retailer noted that it will continue to operate all sites as normal, with a spokesperson saying: “Asda’s property strategy is centred on maintaining a strong freehold base while also taking a considered and selective approach to unlocking value from our estate where appropriate.
These transactions reflect that approach, enabling us to realise value from the sites while retaining full operational control.”
A report by the Financial Times stated that Asda intends to use the proceeds to help it repay a debt to Walmart, which retained a 10% stake in the company following the £6.8bn debt-fueled acquisition by TDR and the Issa brothers in 2021.
The structure of the buyout left Asda owing the US retail giant so-called payment-in-kind interest, which is rolled up and added to the principal due. When the investment matures in 2028, Asda could owe Walmart £900m. Sources told the FT that Asda was seeking to settle the debt next year before the interest rate begins to rise.
The latest sale & leaseback deals struck take the total amount TDR has raised from Asda’s property portfolio to more than £3bn.
Despite showing some ‘green shoots’ of progress from Chairman Allan Leighton’s turnaround plan, the latest Worldpanel data suggests that Asda is struggling to win back shoppers from fast-growing rivals Tesco and Sainsbury’s, and the discounters.
Over the 12 weeks to 2nd November, Asda’s market share slipped from 12.6% to 11.6% following a 3.9% sales decline.
NamNews Implications:
All properties are subject to 25-year lease agreements, with an option to renew for an additional 10 years.
The struggling retailer noted that it will continue to operate all sites as normal, with a spokesperson saying: “Asda’s property strategy is centred on maintaining a strong freehold base while also taking a considered and selective approach to unlocking value from our estate where appropriate.
These transactions reflect that approach, enabling us to realise value from the sites while retaining full operational control.”
A report by the Financial Times stated that Asda intends to use the proceeds to help it repay a debt to Walmart, which retained a 10% stake in the company following the £6.8bn debt-fueled acquisition by TDR and the Issa brothers in 2021.
The structure of the buyout left Asda owing the US retail giant so-called payment-in-kind interest, which is rolled up and added to the principal due. When the investment matures in 2028, Asda could owe Walmart £900m. Sources told the FT that Asda was seeking to settle the debt next year before the interest rate begins to rise.
The latest sale & leaseback deals struck take the total amount TDR has raised from Asda’s property portfolio to more than £3bn.
Despite showing some ‘green shoots’ of progress from Chairman Allan Leighton’s turnaround plan, the latest Worldpanel data suggests that Asda is struggling to win back shoppers from fast-growing rivals Tesco and Sainsbury’s, and the discounters.
Over the 12 weeks to 2nd November, Asda’s market share slipped from 12.6% to 11.6% following a 3.9% sales decline.
NamNews Implications:
- ‘Business as usual’ following sale & leaseback.
- But with the rental costs on those stores hitting the bottom line.
- But the capital gain can help to pay down some debt.
- Watch this space…
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