Ocado is facing the issue of repaying its piling debt amid an increase in interest rates, with the online technology grocery company entering a higher interest bond agreement.

The company was founded by former Goldman Sachs bond trader Tim Steiner and acquired an estimated valuation of around £2bn, according to the Telegraph.

Ocado provides robot warehouse technology and has partnered with major retailers including Morrisons and Marks & Spencer. However, its debt interest bill surged to £100m from £27.3m in the year prior due to a restructuring in its debt.

Ocado underwent a bond refinancing of £300m in May, which is set to be paid off in 2030 at an agreed coupon rate of 11%.

This decision allows the online grocer to delay the repayment of its debt; however, it is a significant increase from its previously existing bonds which were between 0.9% and 3.9%.

Ocado’s net debt totalled £1.2bn compared to its equity value of nearly £1.9bn, which raises concerns and also points to the issue of soaring interest rates affecting companies.

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Last year the company continued to struggle financially, posting pre-tax losses of £375m with a £1.2bn revenue.

The company has been making strategic moves to offset costs amid its piling debt, cutting off around 1,000 jobs in 2024. Ocado also announced plans to streamline its research and development force in February as it pushed towards profitability.

Fitch Ratings allocated its new debt restructuring a B due to an “execution risk on reaching scale and profitability that remains high due to the slow deployment of the company’s infrastructure by its partners, while its liquidity position is being eroded by high capex”.

A path towards recovery is possible for Ocado if it leverages its partnership with US supermarket chain Kroger, which currently has only eight technology-driven warehouses. Solidifying and growing its supply to Kroger will open the doors for other retailers to partner with Ocado, which aims to swing into profitability by next year.

Brittain Ladd, a consultant, told the Telegraph: “The biggest challenge for Ocado is that they haven’t been able to stabilise the relationship with Kroger.Ocado must get Kroger to announce they view Ocado as a long-term solution and partner. The failure to do this is why Ocado isn’t signing other retailers.”

Ocado’s interim results are set to be released in July with mounting pressure looming for the company to strike a deal with Kroger to turn around its finances.