Asda secures £155m loan to manage debt repayments

SUPERMARKET chain Asda has borrowed an additional £155 million to address its mounting financial challenges, seeking to alleviate growing concerns about its financial stability.

The supermarket, co-owned by TDR Capital and entrepreneur Mohsin Issa, confirmed that lenders had approved a top-up to an existing loan maturing in 2031. The funds will be used alongside £155m from its balance sheet to pay off £310m of debt due in 2025 and 2026, reported the Telegraph.

With this move, Asda claims to have eliminated all debt repayments for the remainder of the decade. The development comes after increased scrutiny of the company's financial position, with its current debt standing at approximately £6 billion, resulting in £441m in finance costs last year.

Credit rating agency Fitch had previously raised red flags about the supermarket's financial health. The agency warned of significant debt challenges, particularly a £900m bill owed to former owner Walmart, which could potentially force a restructuring of Asda's capital framework by 2027.

Market performance has added to the company's challenges. According to market research firm Kantar, Asda's grocery market share has declined from 14.8 per cent to 12.5 per cent since its acquisition in 2021, with sales dropping 5.5 per cent year-on-year.

The supermarket has been proactively managing its financial challenges. In May, it refinanced over £3.2bn of borrowing, though this resulted in higher interest rates on some debt.

Asda has recently brought in retail veteran Allan Leighton as chairman, hoping to turn around its fortunes. Leighton, who previously led the company between 1996 and 2001, has prioritised finding a new chief executive and improving the chain's competitiveness.

A spokesman said, “Asda continues to take a disciplined and proactive approach to managing its debt obligations.

“Asda is a highly cash-generative business with a strong and stable capital structure, enabling us to invest in our colleagues and new customer propositions while simultaneously reducing leverage.”

According to the report, the loan arrangement represents a strategic attempt to provide financial breathing room and restore confidence in the supermarket's long-term viability.