A leading credit agency has downgraded Asda from “stable” to “negative” following its £600m purchase of Co-op’s forecourts.
Fitch Ratings said the move reflected the extra £200m of debt that Asda will use to help finance the Co-op deal, as well as a downgrade to the grocer’s likely earnings this year.
Asda was bought by the billionaire Issa brothers and TDR Capital for £6.8bn last year. But the retailer’s new owners put in less than £800m of equity. The highly-leveraged deal has left Asda with a large interest bill, which amounted to about £375m last year.
The acquisition from the Co-op was announced at the end of August and involves the purchase of 129 petrol forecourts with convenience stores and three development sites.
Asda is paying for the purchase with £238m of cash and £200m of debt. Including lease liabilities, the deal was valued at about £600m.
