Asda Sells Supermarkets for 600 Million Pounds to Reduce Debt Pile

Asda has offloaded two dozen supermarkets and a distribution depot in a £568 million transaction designed to alleviate the retailer’s substantial £3.8 billion debt burden. The sale represents the latest effort by TDR Capital, which holds a majority stake in the struggling supermarket chain, to extract value from its property portfolio whilst maintaining operational control of the sites.

The transaction involves two separate buyers. Blue Owl, a Wall Street private credit group, has acquired 20 stores and a Leicestershire depot for £467 million, with 10 of these properties purchased through a joint venture with Supermarket Income REIT. Investment managers DTZ have separately purchased 10 sites for £101 million. The retailer will retain occupancy through sale-and-leaseback arrangements, committing to 25-year leases with options to extend for an additional decade.

Asda’s management has characterised the disposal as consistent with its property strategy, which balances maintaining a strong freehold base against selective asset monetisation. The company stated that proceeds would fund ongoing capital investments whilst reducing net leverage, though analysts have raised concerns about the long-term implications of such financing arrangements.

The timing of the sale appears strategic, given Asda’s looming obligations to Walmart, its former American owner. Moody’s estimates approximately £1 billion in liabilities coming due by 2028, including a £900 million payment owed to Walmart. Timo Fittig, a Moody’s analyst, noted that whilst the transaction enables Asda to address upcoming debt and preference share maturities, it will simultaneously increase the company’s long-term debt burden through additional lease obligations that likely exceed the proceeds raised.

The capital injection comes at a critical juncture for Allan Leighton, Asda’s chief executive, who has struggled to reverse the retailer’s declining market position despite promises of a turnaround strategy. Leighton announced in March that he had secured a substantial investment allocation for price reductions, improved product availability, and store upgrades. However, recent industry data paints a concerning picture of the chain’s commercial performance.

Kantar Worldpanel figures for the 12-week period ending 2 November revealed Asda’s market share had contracted to 11.6 per cent from 12.7 per cent during the comparable period when Leighton assumed leadership. This represents a historic low for the retailer, suggesting that the turnaround initiatives have yet to gain traction with consumers. The deteriorating market position raises questions about management’s ability to stabilise operations and justify the substantial debt load.

Shore Capital analyst Clive Black expressed scepticism about the strategic necessity of additional sale-and-leaseback activity, arguing that whilst such transactions reduce absolute indebtedness, they increase operational gearing through higher annual rental commitments. Black emphasised that this growing fixed-cost burden would be manageable if trading performance were robust, but Asda’s current commercial difficulties make the increased financial obligations particularly problematic.

The transaction also expands Asda’s exposure to the private credit market through Blue Owl, which has recently faced its own challenges. The private credit firm abandoned plans to merge two of its credit funds earlier this week amid mounting scrutiny of potential vulnerabilities in the shadow banking sector. Blue Owl’s shares have declined 26 per cent over the past six months, reflecting broader concerns about private credit market stability. This development adds an additional layer of risk to Asda’s financing structure at a time when the retailer can ill afford further complications.

The sale underscores the difficult position facing Asda’s ownership group as they attempt to balance debt reduction against the need for operational investment. The company’s declining market share suggests that competitors are successfully capturing consumers whom Asda has failed to retain, placing additional pressure on management to demonstrate that their turnaround strategy can deliver tangible results. Without meaningful improvement in trading performance, the retailer may face continued pressure to monetise assets simply to service its debt obligations, potentially limiting its ability to compete effectively in an increasingly challenging retail environment.