HALISTER1: Tesco’s First Secured Bond Top Pick in Retailer’s Upturn: 24AM

Tesco’s First Secured Bond Top Pick in Retailer’s Upturn: 24AM

(Bloomberg) -- Tesco’s first-ever secured bond is the top pick for buyers of its debt in an upturn, as the retailer’s best quality properties back the notes, TwentyFour Asset Management portfolio manager Gordon Shannon writes in a client note.
  • Likes the “extra security” of bonds secured on Tesco property and lower duration of their amortizing debt structure; means the bonds “generally experience less volatility than longer dated unsecured debt”
  • The quality of properties backing Tesco’s Delamare Finance secured notes give us “an extra layer of comfort,” Shannon wrote
    • With Tesco’s recovery in sight, “capturing a 6% yield” from the notes is an attractive proposition
  • Notes Tesco has GBP14b of public debt outstanding; says its purchase of Booker is credit positive and analyst consensus is for the retailer to regain an investment grade rating in 3 years
  • NOTE: Tesco’s Booker takeover a ‘modest’ credit positive, Moody’s said
  • Earlier: Tesco Ratings Affirmed on Booker Deal by S&P
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
TSCO LN (Tesco PLC)

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Gordon Shannon (TwentyFour Asset Management LLP)

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