Asda’s owners take on £1.5bn in liabilities for petrol station deal

Asda’s owners have come under scrutiny for creating nearly £1.5bn in new liabilities to finance a buyout of a petrol stations business, not included in the supermarket chain’s headline debt figures. The UK and Irish operations of EG Group were acquired by Asda for £2bn last year, both owned by private equity firm TDR Capital and the billionaire Issa brothers.

The financial engineering used to build their retail and petrol pump business has raised concerns, with transactions including selling off properties and leasing them back, borrowing against ground rents, and shareholder loans. These methods have increased Asda’s annual interest costs and lease payments significantly.

Analysts predict Asda’s debt and lease payments could rise even further, with the group’s financial reporting being criticized for obscuring the growing burden of leases. The owners have faced scrutiny for their financing methods, including borrowing from EG Group to buy private jets.

Despite the controversy, Asda maintains that the structure of the EG deal was clearly communicated to all financial stakeholders and that its financial reporting is consistent. The company recently borrowed £2.85bn to refinance debt from its 2021 buyout, resulting in credit rating upgrades.

Speculation about a rift between the Issa brothers and media scrutiny of their private lives have added to the drama surrounding Asda’s financial dealings. The bond prospectus indicates that discussions are ongoing regarding Zuber Issa’s future as a shareholder in Asda, with agreements in place to offer shares to other shareholders before selling to a third party.