Iceland Foods executive chairman Richard Walker hailed the supermarket’s “super exciting growth prospects” after it completed a €600m bond debt refinancing deal.
The deal, which is equivalent to roughly £514m, has enabled the supermarket to push back £432m of bonds due to be repaid by 2027, to 2033.
Iceland has also been able to reduce the interest it pays on the new longer-term bonds, from 10.9% to 6.6%, and will use some of the funds to service its remaining debts.
In anticipation of the deal being completed, earlier this week ratings agency Fitch boosted Iceland’s credit rating from a B to a B+.
While still in junk status, the positive outlook reflected Iceland’s position as a specialist frozen retailer, “resilient profitability” and “commitment to deleveraging”, Fitch said.
Announcing the deal, Walker said that Iceland would have liked to have refinanced through UK capital markets, however it was forced to look abroad as Sterling Capital Markets “weren’t there”.
“What an amazing business it is,” Walker said. “We’ve proved ourselves to be resilient, dependable and have super exciting future growth prospects.”
Turnaround from crippling debt fears
It’s the latest move by Iceland over the past three years to reduce the more than £700m debt pile left after founder Malcolm Walker took Iceland back into family ownership alongside co-owner and CEO Tarsem Dhaliwal in 2020, having returned to the business in 2012.
The positive outlook is a major turnaround from 2022, when it looked like the debt mountain could cripple the company after its costs surged in the wake of Covid and the Ukraine war.
Iceland’s bond price crashed to as low as 67p in 2022, leading to speculation that the Walkers could once again sell the business.
The owners always maintained that it had liquidity to service its debts, however several supplier credit providers suspended cover for the company in February 2023 over concerns it could run out of cash.
The supermarket has since completed several refinancing deals, and secured long-term agreements to hedge its energy costs – including a 10-year deal with Octopus Energy to provide solar power to 150 Iceland stores in March 2023.
Bar 2021, Iceland had repaid between £15m and £20m a year, Fitch said in its note. Iceland still has around £250m of senior secured fixed rate notes and €250m of floating Euro notes due to be repaid by 2028, according to latest accounts. Fitch expects gross leverage to reach 5.1% by 2027.
“We forecast EBITDA will improve to around 3.6% of sales from 3.4% in FY26, supported by continued sales growth, value positioning, ongoing Food Warehouse store expansion, and the rationalisation of its core store base,” Fitch added.
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