Asda owners are anticipating a significant rise in the cost of managing its £4 billion debt load early this year, according to statements made by its executives during questioning by Members of Parliament regarding the retailer's financial situation. The company is set to encounter a £30 million increase in debt costs in February when the fixed interest rate on a portion of its £4.2 billion debt is set to expire.
Members of the business and trade committee raised questions about the financial state of the supermarket, more than two years after it underwent a debt-heavy acquisition by billionaire brothers Mohsin and Zuber Issa, along with private equity group TDR Capital. The MPs highlighted that the acquisition of Asda, the third-largest grocer in the UK, resulted in a debt burden exceeding £4 billion being added to the company's balance sheet. Subsequently, deteriorating borrowing conditions led to two credit rating downgrades.
Facing the committee, Asda co-owner Mohsin Issa defended the company's management decisions, emphasising their choice to invest in customers, including £140 million in price cuts to alleviate the impact of the cost of living crisis, even at the expense of profits. Issa noted that Asda's 151,000 employees in the UK had received two pay raises of 8% and 10% since the takeover.