Asda plans bond market return with £500M add-on to 2026 notes

Asda Group Ltd. is out with details on a new £500 million tap of its outstanding £2.25 billion of 3.25% secured notes due February 2026, via a Barclays-led bookrunner group. Initial price thoughts are 4.75%-5%, with the bonds having closed yesterday at 96.30, for a 4.197% yield to worst, according to data compiled by S&P Market Intelligence.

A global investor call is planned for tomorrow, Oct. 27, with additional one-on-ones penciled through Thursday, Oct. 28. Deutsche Bank is also a physical bookrunner, with BofA Securities, Lloyds, Morgan Stanley, Rabobank and HSBC making up the rest of the bookrunner group.

Proceeds from the bond tap, which adds to the largest ever sterling corporate tranche having been issued in February as part of the Issa brother's takeover of the U.K. supermarket chain, will be used to repay drawings under an outstanding bridge facility.

The return to the bond market comes after the planned £750 million sale of the supermarket's filling station forecourt business to Issa brother's EG Group fell through earlier this month, prompting the cancellation of £675 million of 6.25% 2026 secured bonds issued by the group in March. The brothers had initially planned to use proceeds from the sale of Asda filling station business to fund its purchase of the supermarket.

As reported, Asda's outstanding bonds, which includes a £500 million of 4% 2027 unsecured notes issued alongside the bonds being tapped, sold off substantially last week following the news, but rallied toward the end of last week as the market mostly shrugged off the aborted forecourt sale. In addition to the £2.75 billion in high-yield bonds, the supermarket issued an €850 million term loan to fund the takeover in February.

Asda is the U.K.'s third-largest supermarket chain. The Issa brothers and TDR Capital completed the £6.7 billion acquisition of the company from Walmart in February this year. Banks are guiding investors to expect secured debt ratings of Ba3/BB+ (M/F) and corporate ratings of Ba3/BB- (M/F), both with stable outlooks.