The supermarket giant Tesco has raised $2bn (£990m) of debt in its first dollar-denominated bond issue as it gears up for its assault on the US market with the launch of six stores in southern California next week.
Tesco said the issue was not directly related to the funding of its expansion plans, which will initially see stores open under the brand Fresh & Easy, but said the move would raise its profile with US bond investors and diversify its investor base. The proceeds of the debt raising, which was jointly arranged by Citigroup and JP Morgan Cazenove, would be used for "general corporate purposes", Tesco said.
The bond issue includes 10-year notes paying 5.5 per cent interest and 30-year notes paying 6.15 per cent interest.
No other major UK retailer has achieved significant inroads in the US and Tesco's attempt to crack the market is being seen as one of the biggest challenges for its chief executive Sir Terry Leahy since he took over the running of the supermarket.
The Fresh & Easy stores, which will be smaller than an average UK supermarket at around 10,000 sq ft, will be located in the heart of neighbourhoods – unlike Wal-Mart, which places its giant supermarkets on the outskirts of towns and cities, close by large shopping malls.
Tesco is planning to invest up to £250m a year in the US and Sir Terry expects 50 stores to be up and running by the end of February, with five planned for Las Vegas and further sites in Phoenix and San Diego.
As Tesco makes its final preparations for its expansion into the US, it will today hear the results of the Competition Commission's inquiry into the Big Four supermarkets in the UK, after an 18-month investigation. The commission is expected to call for the introduction of an ombudsman to protect food suppliers against the might of Tesco, Asda, Sainsbury and Morrisons, and include a crackdown on supermarkets' land holdings.
Earlier this month, Sir Terry said of the investigation: "I don't have any concerns about the competition inquiry. The real judge is the consumer. "They're the best at picking the winners and the losers... they pass judgement on you every day."Reuse content