The private equity-backed billionaires buying Asda have raised the largest-ever sterling junk bond, with investors piling in to the £2.75bn debt sale backing the UK’s biggest leveraged buyout in more than a decade.

The new junk bond is the centrepiece of an intricate series of debt deals and asset disposals through which Blackburn-based brothers Mohsin and Zuber Issa and the private equity firm TDR Capital will acquire the grocery chain for £6.8bn.

While this structure has allowed the new buyers to put up only a thin sliver of their own equity, the £2.75bn bond sale drew more than £8bn of orders from investors, who were enticed by Asda’s relatively low debt burden and the £9bn of property value underpinning the deal.

“It was always going to be a blowout deal,” said Vivek Bommi, a senior portfolio manager at Neuberger Berman. “It’s an easy business model and reasonably levered.”

Read More

Source: Financial Times

By Robert Smith, Nikou Asgari and Kaye Wiggins