ASDA - comment

The impact of the deal will be to layer the SSNs and SUNs with another £568m of debt. The use of the cash will be to support the turnaround of ASDA’s grocery business, and in the short term, this will be largely through price subsidies. The alternative is raising debt at a higher cost. ASDA needs to demonstrate that the cash being spent is beginning to halt the volume slide, although the process is expected to take up to three years, and we are <1 year in. The sale and lease-back deal is at a rate of 7.5%, good value for ASDA, and management had indicated that further S&L deals would be forthcoming.

https://www.ft.com/content/79ed1bc1-2a1d-40f9-8f61-88c8413fe233