Questions are mounting over the scale of the debt burden looming over the Issa brothers, the billionaire owners behind Asda and petrol forecourt business EG Group, after an Evening Standard analysis found the company could face increased interest payments of as much as $250 million (£202 million) per year in 2023.
EG Group has at least $9 billion of debt, according to its most recent quarterly report. 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 five months, leading to hundreds of millions in increased debt interest.
Annual accounts for EG Finco, the financing subsidiary of Mohsin and Zuber Issa’s EG Group, are now several weeks overdue after it failed to file them by year end, Companies House records show.
Sandeep Dhingra, CEO of capital markets insight business FactEntry, said the firm could find it difficult to refinance its debt without paying higher interest rates than before.
“It’s not a good time to have this much debt on your plate -- you have to hope you can grow the business to cover up that liability,” he said.
“It’s like a bucket with a small leaking hole at the bottom, you have to keep topping it up so no one worries about what’s going on on the other side.”
EG Finco this week said it had wiped the company’s share premium account – the total cash it received for shares over and above their nominal value – which had been worth over £300 million according to its most recent annual report. A person familiar with the matter said the move was part of an internal reorganisation of EG’s businesses.
The subsidiary filed an insolvency statement as part of the move – a regulatory requirement in which the directors must attest they believe the company will remain solvent for at least the next twelve months. Most EG Group debt matures in 2025.
It comes as Asda, which is also owned by the brothers, yesterday said it would consult on reducing pay for more than 4,000 night-time staff.
A spokesperson from the GMB Union told the Standard meetings it requested with the Issa brothers to discuss their debt position were turned down.
“The fact that Asda…has not offered mid-year pay increases in line with competitors speaks to a growing sense that it is the workers that keep the business going that may end up paying the price for such reckless debt leveraging,” GMB said.
The billionaire brothers, who founded EG Group as Euro Garages in 2001, are mulling merging the company with Asda, according to reports in the Sunday Times. The pair also own the Leon fast food chain after acquiring it in 2021.
EG Group declined to comment.