Iceland MD Richard Walker’s bid to become an MP is not good for the supermarket’s prospects of refinancing its debt in 2025, a City source has claimed.
It could leave the business more vulnerable to takeover from opportunistic investors who have been buying its debt at a discount, the source said.
Walker’s hopes of being an MP emerged earlier this year after his name appeared on the Conservative Party’s list of approved parliamentary candidates. He has since spoken publicly about his ambition, including on ITV’s political interview show Peston yesterday (12 December). Introduced by host Robert Peston as “the boss of Iceland Foods who’s also a Tory candidate”, Walker defended the government’s stance on striking nurses and rail workers.
Iceland has £550m of bonds that need to be repaid in 2025, and difficulty in refinancing could create an opportunity for investors to seize control in a debt-for-equity swap. Investors were buying the supermarket’s debt for as little as 67p in the pound earlier this year, the Telegraph reported in November.
The City source told The Grocer Walker’s MP bid could put lenders off by signalling an intention to exit the business, creating a degree of uncertainty over its future leadership, with no clear successor to Iceland founder Malcolm Walker, Richard Walker’s father.
“You can’t do both, and it will be a massive distraction if he goes down that path,” the source said. “His willingness showcases he is contemplating an exit.”
The source said the frozen food retailer’s surging energy costs were already bad for its refinancing prospects, in a market where retailers were “unsurprisingly not the flavour of the month” with lenders. “A very reduced number of lenders are willing to open their books for retailers at the moment.
“Iceland has the challenges many grocers have at the moment but theirs is proliferated by their categories eating an awful lot of electricity.
“Normally a refinancing cycle starts 12 months before you actually need to put pen to paper. They will be hoping that by 2024 things look a lot better and they have taken market share during the downturn. The longer the slump lasts, the trickier the prospects are for them.
“If I was a bank, I would want guarantees he is not going to wander off into the sunset. As a bank, if you’re putting your money against a name then you want to know it’s in credible hands.
“When you’re looking at a refinancing exercise it’s not just the numbers. There is also a much broader outlook for the business, including who are you lending to, as in the management team.”
As well as leaving the business more vulnerable to takeover, the absence of a successor to Malcolm Walker made it plausible the family was considering offloading it, the source said. “My suspicion is a difficult refinancing, a difficult market, a head of family whose successor may not want to do this any more – therefore the family might be contemplating divesting the business.”
Iceland co-owners Malcolm Walker and Tarsem Dhaliwal recently denied rumours they had been ‘quietly marketing’ Iceland. They said: “Our sons, Richard Walker and Paul Dhaliwal, hold executive positions and will take over from us in the future. We have no plans to sell the business, despite frequent approaches.”
Richard Walker did not respond to The Grocer’s enquiries.
Asked by Peston about his desire to be a Tory MP, he said: “I think about it every day and a lot of people are questioning it but I believe in democracy and I think we need more people from our type of political world.”
While the market shares of discounters Lidl and Aldi have climbed rapidly in the cost of living crisis, Iceland’s has been fairly static. It was 2.3% in the 12 weeks to 27 November, according to Kantar, the same as a year earlier.
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