Tesco is buying back up to £ 700 million in debt
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Tesco looks to repay up to £ 700 million of its debt as the retailer seeks to strengthen its balance sheet and regain its investment grade status.
The UK’s largest grocer made a takeover bid for seven series of its pound and euro banknotes on Monday, the company said. The call for tenders ends on October 24th, pricing takes place on the following day and processing on October 30th.
“The offerings come as part of Tesco’s ongoing efforts to bolster its balance sheet and aim to efficiently use excess liquidity to reduce gross debt,” the statement said.
Tesco had downgraded its bonds to junk from Moody’s in January 2015 when its net debt was closer to £ 8.5 billion. Since then, its net debt has more than halved – it has shrunk by a quarter in the twelve months to August – as the supermarket chain under CEO Dave Lewis went through a turnaround.
Earlier this month, Tesco reintroduced its dividend for the first time in three years, posted half-year pre-tax profits of nearly £ half a billion year-over-year and reduced net debt to £ 3.3 billion.
“By maintaining a disciplined approach to capital and further reducing debt, we can further strengthen the balance sheet, return to investment grade credit metrics, and generate higher free cash flow,” the half-year statement of operations reads.
Tesco’s bonds are currently rated as the top tier of scrap by Moody’s, S&P and Fitch, with the outlook marked as stable for each.
One hedge fund investor described the takeover offer as “very generous”. The prices of all series to which the takeover offer relates rose shortly before the publication date compared to yesterday’s close of trading.