Issa brothers’ EG Group shifted £3 billion in debt prior to Asda merger, filings show

In late January, the firm’s holding company bought shares in its financing subsidiary, EG Finco, in exchange for a £3.03 billion loan, filings released last month show. The following day, Finco declared a dividend to its parent company for the same sum, which it used to invest in its American subsidiary, thereby releasing it from its debt obligations.

EG Group declined to comment. There is no suggestion any individuals received cash as part of the transactions.

The transfers are the latest sign of the billionaire Issa brother’s drive to bear down on the firm’s billion-dollar debt burdens in the wake of soaring interest rates.

The firm had racked up borrowings of over $9 billion by the end of last year, its annual report shows. The majority is made up of loans with interest pegged to LIBOR, EURIBOR and SONIA, indices representing the rate at which banks lend to each other. These rates have as much as quadrupled in the past nine months, leading to hundreds of millions in increased debt interest.

In March, the company struck a $1.5 billion dollar sale and leaseback deal on its property in the US, while earlier this week, the firm sold the majority of its UK operations to Asda, also owned by the billionaire duo, in a £2.3 billion deal which it said would help EG Group deleverage.

Asda was lumbered with a £770 million loan from equity house Apollo as part of the deal.

Chair Stuart rose told reporters that the primary purpose of the deal was to expand Asda’s operations but “if as a consequence you’ve also got the opportunity to deleverage then what’s the problem with that?”

Mohsin Issa said: “We’ve engaged with credit ratings agencies and the feedback we’ve got is that this is credit-positive.”