Tesco's debt-fueled growth sparks investor backlash
Bloomberg / London June 22, 2009, 0:19 IST
Tesco Plcâ€™s decade of international expansion has pushed debt ratios at the UKâ€™s largest retailer to record levels, endangering the companyâ€™s credit rating and sparking a backlash from fund managers and bondholders.
Bradley Mitchell, who helps oversee about $62 billion at Royal London Asset Management, said he stopped holding Tesco shares for the first time in 20 years in October as the stock didnâ€™t adequately reflect the risks faced by the supermarket operator. Cheshunt, England-based Tesco has net debt of Â£9.6 billion ($15.6 billion) and this week sold Â£431 million of mortgage-backed bonds secured on commercial property.
â€œTesco never get to the point where they generate cash,â€ said Mitchell. â€œAt the end of every year, they have more debt than they did at the start because thereâ€™s always new markets to invest in. I used to be a big fan, but there is a lot to be concerned about.â€