Buyers load up in Asda’s supermarket sweep
Investment grade and non-sterling bond investors submitted big orders for the largest ever European high-yield deal, but half received zero allocation.
It had been a long time coming, but when the high-yield bond to finance the purchase from Walmart of a majority stake in Asda finally priced on February 10, it was worth the wait.
Walmart had announced the sale for £6.8 billion of a majority stake in its UK affiliate back in October 2020. The stake was sold to the Issa Brothers, founders and co-CEOs of EG Group, a global convenience and forecourts retailer headquartered in Blackburn, and to investment funds managed by TDR Capital, the UK-based private equity firm.
The buyers took their time to devise a capital structure that would allow them to leverage up an equity investment of just under £800 million and still offer an attractive Ba2/BB- rated credit to investors, based on the company’s strong cash flow and property assets.
The high-yield bond deal came last week. It was split into a £2.25 billion secured tranche and a £500 million unsecured tranche rated B1/B+, making this the largest issue ever in the European high-yield market and the biggest ever single-tranche sterling corporate bond.
We wanted to push hard and explore the maximum capacity of the sterling market
While investors have been hunting for yield with increasing desperation and a number of investment grade accounts crossed over into the BB- senior tranche, this was an eye-catching sum to raise in sterling, a much smaller market than the traditional mainstays for financing leveraged buyouts in dollars and euros.