Asda Sells 24 Stores, Leases Back Amid Debt Challenges
Asda, the well-known supermarket chain, has announced the sale of 24 of its stores and the Lutterworth depot amid ongoing challenges with debt. The company will lease back these properties, which means there will be no immediate changes to operations.
Details of the Sale
Two different buyers acquired the properties. DTZ Investors purchased four stores located in:
- Small Heath, Birmingham
- Colindale, London
- Coventry Abbey Park
- Killingbeck, Leeds
Meanwhile, a private credit group, Blue Owl Capital, bought the remaining 20 stores along with the Lutterworth depot. Both transactions involve 25-year lease agreements, with an option to extend for another ten years.
Financial Implications
This strategy has been viewed as a significant move for Asda, which raised £568 million from these transactions. Despite the influx of cash, the company continues to grapple with a sizeable debt of £3.8 billion as of 2024, consistent with previous figures from 2023.
Criticism and Concerns
The GMB union has expressed concerns over the sale, labeling it as “asset stripping” by the private equity-owned chain. Nadine Houghton, the union’s national officer, highlighted that while debt and lease liabilities have increased, the company’s market share and staff morale have significantly declined.
Moreover, reports from GMB members indicate that health and safety standards are deteriorating, which adds to the stress levels among staff.
Corporate Context
Asda was acquired in 2020 by billionaires Zuber and Mohsin Issa, with the backing of TDR Capital, for £6.8 billion. The supermarket’s ownership has attracted political scrutiny, particularly regarding its complex corporate structure, which includes 16 entities, some of which are registered offshore. This situation mirrors challenges faced by other supermarket chains, like Morrisons, which recently negotiated a £370 million deal to reduce its debt through property value optimization.
Future Outlook
Despite these challenges, an Asda spokesperson noted that the company’s property strategy aims to maintain a robust freehold base while selectively unlocking value from its estate. This latest move will allow Asda to continue operating its stores while addressing its financial challenges.
