Asda Sells Supermarkets to Cut Debt as Market Share Slides

Asda has announced the sale of dozens of supermarkets as private equity owners accelerate efforts to address a £3.8 billion debt burden. The supermarket chain, predominantly owned by TDR Capital, revealed on Thursday a £568 million deal involving two separate buyers for a total of 24 supermarkets and one distribution depot, constituting its latest bid to raise funds through asset sales.

Under the newly agreed terms, Asda will hand over 20 stores and a depot in Leicestershire to Blue Owl, the US private credit specialist, and Supermarket Income REIT for a combined £467 million. An additional 10 sites have been sold to investment managers DTZ for £101 million. Despite these transactions, Asda will continue to operate on these premises via a sale and leaseback structure, having committed to a 25-year lease with a 10-year extension option.

A spokesperson for Asda underscored that the property strategy remains focused on preserving a robust base of freehold assets, while opportunistically releasing capital from selected estate properties. The retailer stated that the proceeds will be deployed to support ongoing capital investment and help reduce net leverage.

The company is expected to allocate a share of the newly raised capital to cover a pressing debt repayment due to former owner Walmart. According to Moody’s, Asda faces liabilities totalling roughly £1 billion that must be resolved by 2028, including a £900 million bill owed to the US retail giant. Moody’s analyst Timo Fittig noted the deal provides the means to address upcoming maturities, though the long-term debt burden is likely to increase as lease obligations surpass the funds received from the sale.

The proceeds are also expected to aid Asda’s turnaround strategy under chief executive Allan Leighton, who is under increasing pressure to improve customer trends. Leighton recently promoted a substantial investment fund to advance price reductions, enhance product availability and upgrade stores. However, latest industry data indicates the strategy has yet to take effect, with Asda’s market share currently at a record low. Recent figures show its market share has fallen to 11.8 percent, down from 12.7 percent a year earlier, reflecting worsening sales performance.

Shore Capital analyst Clive Black remarked that Asda would likely have preferred to avoid further sale and leaseback deals. Reducing the asset base may contribute to lower indebtedness, he said, but it increases fixed costs and operational gearing by expanding the annual rental obligations. Black added this would be less concerning if trading conditions were more favourable.

The arrangement also elevates Asda’s exposure to private credit markets through its new partnership with Blue Owl. The private credit sector has come under regulatory scrutiny recently, heightening the perceived risks of such transactions. Shares in Blue Owl have fallen 26 percent over the past six months, adding an extra layer of uncertainty as Asda pursues its recovery plan.

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