Malcolm and Richard Walker. Source: Iceland Foods

Malcolm Walker’s hopes of refinancing Iceland Food’s £750m net debt have been boosted by “better than expected” guidance despite what were muted third quarter results, according to Moody’s.

Iceland posted revenues just short of £3bn in the nine months to December 2022, a 5.6% increase on the same period the previous year, according to results that were issued to bond holders on Wednesday.

The growth helped Iceland increase its share of the frozen grocery market to 19%, leaving it only two percentage points behind Tesco, Moody’s said. Its stake in the overall grocery market remained stable, at 2.4% for the 12 weeks to 25 December 2022, according to Kantar data.

However, rising energy costs since the beginning of the Ukraine war saw EBITDA fall 35% to £57m during the nine-month period, compared to the same time the previous year. But with energy costs now falling Moody’s expects Iceland’s EBITDA to grow to around £115m by the end of the financial year in March.

That’s still short of full year 2022’s £140m EBITDA “but a significant improvement compared to the first nine months of fiscal 2023,” Moody’s said.

The more positive outlook improved the prospect for a refinancing and reduces the negative pressure on the company’s credit rating, the agency said.

Iceland has been working to mitigate its growing energy bills through various initiatives including stocking less chilled items, putting solar panels on stores, and switching to more economical freezers. As a result, it’s expecting to reduce its overall energy outlay by £25m during the 2024 fiscal year, Moody’s said.

The retailer has also signed long-term deals to secure around 40% of its energy needs for the 2023 fiscal year at a 25% discount. Further agreements mean it has secured around 50% of its energy needs at a more than 50% discount beyond 2024, Moody’s said.

The news should come as positive news for the Walker and Dhaliwal families, following a report by The Sunday Times earlier this week that credit insurance provider Coface had slashed its cover to some of Iceland’s suppliers.

An Iceland spokesperson told The Grocer that the decision affected only a “handful” of suppliers, with whom Iceland had been working over the last three months, adding that Coface has already confirmed it’s looking to reinstate the cover.

However, the French insurer is the third publicly known to have reduced its exposure to the supermarket in the last few months after Allianz and Atradius both cut coverage in November, adding to concerns that Iceland could struggle to finance the £550m of bonds due to be repaid by 2025.

Over the last year the bonds have been trading well below the issue price – dropping to around 67p in the pound at one point – leaving the business potentially vulnerable to a takeover by opportunistic investors if the borrowing ever became unaffordable.

In November Malcolm Walker dismissed reports that there were plans to sell the business, telling The Grocer the owners were “supremely confident” in the business’s refinancing plans.

Moody’s had previously downgraded Iceland from a B2 to a B3 investment rating in August, after the publication of annual results showed Iceland fell to a pre-tax loss of £4.1m in the year to March 2022, compared to a profit of £73.1m in the previous year.