Ratings agency, Fitch has downgraded Asda’s outlook from ‘stable’ to “negative” as debt amounts following its £600 million purchase of Co-op’s forecourt petrol sites.
According to This Is Money, Fitch said the £200 million borrowed by Asda to make the deal possible has left it with more debt than expected.
It has also set the Big 4 grocer‘s debt at ‘BB-minus’, which could result in an ‘elevated’ risk of the business defaulting, with expectations that Asda is unlikely to emerge from its ‘negative’ outlook until 2024.
Despite Asda having a predicted profit of £1.1 billion this year, a spokesperson said that this has now dropped to £850 million, following price rises across its products due to inflationary pressures.
An Asda spokesperson told This Is Money: “We remain focused on our long-term strategy to become the UK’s number-two grocery retailer by delivering value to customers and giving them more opportunities to shop with us. The acquisition of the Co-op sites gives us a meaningful position in a growing convenience market.”
Asda’s recent deal with Co-op includes 129 nationwide petrol forecourt sites set with a grocery retail store between 1,500 and 3,000 square feet and each with a petrol filling station, as well as three development sites.
The Big 4 grocer also opened its 50th ‘On The Move’ site earlier this month as it looks to continue expanding its convenience store offerings.
The new roadside store which opened on the Pride Park retail estate in Derby on 7 September was the first of five sites set to open last week.
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The forecourts are unlikely to value at circa £4m each if indevidually assessed.