This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.theguardian.com/business/2015/sep/07/tesco-reduce-net-debt-homeplus-korean

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
Tesco to reduce net debt by as much as £3.35bn after Homeplus sale Tesco to reduce net debt by as much as £3.35bn after Homeplus sale
(about 1 hour later)
Tesco is to pay off some of its multibillion-pound debts and could buy back the leases on some stores after securing £4bn from the sale of its Korean business, Homeplus.Tesco is to pay off some of its multibillion-pound debts and could buy back the leases on some stores after securing £4bn from the sale of its Korean business, Homeplus.
The supermarket said it could reduce net debt, which stood at £8.5bn in April, by as much as £3.35bn with the proceeds of the sale of Homeplus to a consortium led by MBK Partners, Korea’s largest private equity firm.The supermarket said it could reduce net debt, which stood at £8.5bn in April, by as much as £3.35bn with the proceeds of the sale of Homeplus to a consortium led by MBK Partners, Korea’s largest private equity firm.
Dave Lewis, Tesco chief executive, said: “This sale realises material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet.”Dave Lewis, Tesco chief executive, said: “This sale realises material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet.”
He said the money would be used primarily to redeem bonds and other commercial debt over the next 18 months, but might also be used to purchase the leases on some UK stores.He said the money would be used primarily to redeem bonds and other commercial debt over the next 18 months, but might also be used to purchase the leases on some UK stores.
Tesco has already sold off assets including its Blinkbox video streaming service and has put Dunnhumby, the company behind the Tesco Clubcard, up for sale as it tries to stave off the need to raise cash in a rights issue. The company’s debts have mounted after sales and profits tumbled amid rising competition from discounters in the UK and in the wake of ill-judged moves into the US and Japan.Tesco has already sold off assets including its Blinkbox video streaming service and has put Dunnhumby, the company behind the Tesco Clubcard, up for sale as it tries to stave off the need to raise cash in a rights issue. The company’s debts have mounted after sales and profits tumbled amid rising competition from discounters in the UK and in the wake of ill-judged moves into the US and Japan.
Moody’s, one of the influential credit rating agencies that have cut Tesco’s debt to junk status, said the sale of Homeplus was a step in the right direction, but was not enough for it to upgrade the retailer. Moody’s and Standard & Poors credit rating agencies, which have cut Tesco’s debt to junk status, said the sale of Homeplus was a step in the right direction, but not enough to prompt an upgrade the retailer.
Sven Reinke, senior credit officer at Moody’s, said: “Our rating already anticipated that Tesco could enter into a transaction of this size. Today’s announcement eases the negative pressure on the current rating. However, for positive pressure, Tesco’s underlying UK business needs to recover and I don’t think we are at that stage yet. We see signs of stabilisation but not of a sustainable recovery.”Sven Reinke, senior credit officer at Moody’s, said: “Our rating already anticipated that Tesco could enter into a transaction of this size. Today’s announcement eases the negative pressure on the current rating. However, for positive pressure, Tesco’s underlying UK business needs to recover and I don’t think we are at that stage yet. We see signs of stabilisation but not of a sustainable recovery.”
Clive Black, retail analyst at Shore Capital, said the sale of Homeplus eased Tesco’s financial situation and provided funds to help revitalise the business. But he said: “We see this as at the expense of one of Tesco’s crown jewels, which we estimate would have contributed 15-20% of group [profits] in this year.”Clive Black, retail analyst at Shore Capital, said the sale of Homeplus eased Tesco’s financial situation and provided funds to help revitalise the business. But he said: “We see this as at the expense of one of Tesco’s crown jewels, which we estimate would have contributed 15-20% of group [profits] in this year.”
Homeplus, which was set up by Tesco as a joint venture with Samsung in 1999, operates 1,075 stores and 139 shopping malls in South Korea. At one time the chain was seen as a key part of the British supermarket group’s future. But profits have taken a hit after the Korean government introduced new limits on trading hours to protect smaller shops.Homeplus, which was set up by Tesco as a joint venture with Samsung in 1999, operates 1,075 stores and 139 shopping malls in South Korea. At one time the chain was seen as a key part of the British supermarket group’s future. But profits have taken a hit after the Korean government introduced new limits on trading hours to protect smaller shops.
Tesco said it expected to complete the sale of Homeplus by the end of this year. The buying consortium includes the Canada Pension Plan Investment Board, Public Sector Pension Investment Board and Temasek Holdings.Tesco said it expected to complete the sale of Homeplus by the end of this year. The buying consortium includes the Canada Pension Plan Investment Board, Public Sector Pension Investment Board and Temasek Holdings.