ASDA tightens term loan pricing, accelerates syndication

ASDA Group Ltd. has reverse-flexed pricing on the €840 million term loan backing its buyout, while accelerating the process after only two days of syndication due to strong demand. The five-year facility is now talked at E+300 with a 0% floor offered at 99.5, suggesting a yield to maturity of 3.15%.

The transaction was launched with a bank meeting on Feb. 3, with price talk set at E+325 at 99.5, yielding 3.40%. One-on-one meetings were continuing through to today.

Commitments on the term loan are now due on Feb. 10, brought forward from Feb. 16 previously, via lead left Barclays and joint physical bookrunners Deutsche Bank and Morgan Stanley. BofA Securities, Lloyds, Rabobank and HSBC are joint MLAs and bookrunners, while Bank of China, Intesa Sanpaolo, Commerzbank, NatWest, SMBC and Barclays are MLAs.

The term loan supports the £6.8 billion takeover of the U.K. supermarket chain by the Issa brothers and TDR Capital from Walmart. In addition to the term loan, a £2.25 billion secured bond offering and £500 million of unsecured bonds will follow, according to a company statement. A £190 million revolver rounds out the debt. Walmart will retain a minority holding in the business.

A bond is expected to launch early next week. If the £2.25 billion secured bond is launched as a single-tranche offering, which LCD expects, then it will be the largest ever single-tranche issue in the European high-yield market and the largest single-tranche sterling deal.

Ratings have emerged from Moody's and Fitch at Ba2/BB- (corporate) and Ba2/BB (issue) with a 2 recovery rating.

Earlier this week, the buyers said they expect to complete the acquisition of ASDA later this month (subject to approval from the Financial Conduct Authority). The new owners plan to invest more than £1 billion in the group over the next three years to strengthen the business and supply chain.

On completion of the deal, the shareholders plan to sell ASDA's forecourts business to EG Group, the petrol station group also owned by the Issa brothers and TDR, for a headline enterprise value of £750 million, or a multiple of more than 11x EBITDA. The deal is subject to clearance from the Competition and Markets Authority, and on completion, the assets (which comprise petrol filling stations, car washes and ancillary land) will be integrated into EG Group's U.K. operations.

In a second transaction announced this week, the owners said that — on receipt of final regulatory clearance of the ASDA takeover — they plan to sell certain distribution assets to institutional real-estate investors. ASDA will continue to operate the distribution assets, and the deal will have no day-to-day impact on the sites, the supply chain or workforce.

ASDA is a multi-format retailer that sells its products through a network of 584 grocery stores, 18 stand-alone petrol-filling stations and 33 ASDA living stores, as well as online. In addition to grocery and general merchandise, ASDA operates George, a U.K. clothing retailer. It also has a significant property portfolio, of which 75% of the square footage is freehold.

Article amended at 2 p.m. GMT on Feb. 5, 2021, to update the bank line-up.