EG Group seeks to amend and extend banking loans

Mohsin and Zuber Issa

Blackburn-based petrol forecourt and retail company EG Group, which last week sold its UK and Ireland operations to Asda, announced it is seeking to amend and extend its banking loans.

The three-year amend and extend applies to the remaining $3.4 billion of term loans due in 2025 and 2026, according to Reuters.

Asda and EG are both owned by brothers Zuber and Mohsin Issa and private equity group TDR Capital.

Walmart retains an equity investment in Asda, with an ongoing commercial relationship and a seat on the board.

EG said it remains the third-largest independent fuel convenience retailer in the world — the second biggest independent operator in Europe, fourth largest in the US with around 1,700 stores in 30 states, and a 10% market share in Australia.

“The group has already initiated a process with key relationship banks seeking both an extension of its RCF (revolving credit facility) and banking facilities, and has received good support in this process,” said EG Group in a trading update for the first quarter of 2023 to March 31.

“Following the completion of the Amend & Extend, EG plans to refinance the remaining near-term maturities 12-15 months before their maturity date, resulting in a sustainable long-term capital structure.”

The firm added: “The sale of EG UK&I to Asda for an enterprise value of £2.27bn ($2.8bn) represents an important milestone for the group.

“The combination of this – alongside other announced and completed transactions, as well as the ability to reduce discretionary growth capex – has delivered significant funding for the group to address upcoming maturities through material debt repayment.

“This activity is expected to reduce total net debt from $9,801m in March 2023 to $5,375m post completion of the announced transactions, with net leverage to fall from 6.3x to 4.9x.

“Concurrent with this significant deleveraging activity, the group has launched a three year Amend & Extend of its term loans …”

EG Group reported EBITDA of $228m for Q1 2023, on a constant currency basis, on revenues of $7.2 billion.

“Excluding the impact of inventory revaluations, which were the result of oil price volatility in the current and previous comparable quarter, the group’s underlying trading performance for Q1 was $12m or 5% down versus the prior year period,” said the firm.

In a strategy update, EG Group said: “In the US, there is a clear opportunity to continue the expansion of the Cumberland Farms brand, including store rebranding opportunities and the continued roll out of Cumberland’s leading coffee, private label proposition and Smart Pay solution across EG’s broader US network to create a strong U.S. identity.

“We will further optimise our real estate by identifying new markets – evaluating store locations for expansion through improved Foodservice offerings; investment in new sites; entry into alternative fuels; and continuing to review non-core assets for divestment.

“In the UK and Europe, the group will continue to invest in Foodservice outlets and expand its best-in-class Foodservice proposition, including leveraging our ownership of the Cooplands bakery business; as well as continuing to integrate the forecourt business in Germany.

“In Australia, EG will continue the Ampol rebranding initiatives, with completion of the full rebranding expected by first half of 2023.

“Across all markets, the evolution to alternative fuels presents a major opportunity for the group, with EG’s large site network offering a unique base from which to build a leading rapid charging network.

“The group has identified almost 4,000 high quality potential sites for ultra-rapid charging that have high footfall, enough car parking spaces and complementary Foodservice and/or grocery offerings.

“With the whole of the EV business – including in the UK – remaining in the group, we see a huge opportunity in the near-term to accelerate the rollout of a leading EV charging proposition, under our proprietary brand, evpoint.”

Zuber Issa said: “The sale of EG UK&I to Asda is an important step for the group and provides a platform to further invest across our diverse international portfolio, where we continue to see compelling opportunities to accelerate our proven and successful strategy to rollout Foodservice, and Grocery and Merchandise to create multi-purpose convenience retail sites across our estate.

“We also have a significant near-term opportunity to deploy emerging fuels and EV chargers, across the existing site network and third-party locations.

“The group has now delivered a combination of strategic actions, including the US sale & leaseback transaction – which delivered net proceeds of $1.4bn – that will enable us to significantly reduce our overall leverage to below five times, in line with our financial policy and deleveraging strategy.

“We will now be addressing our upcoming maturities, including a three year Amend & Extend of our Term Loans, which will help us to put in place a sustainable long-term capital structure. We remain committed to achieving a net leverage multiple of mid four times in the near term.

“Over the last 22 years, we have built a hugely successful global multi-purpose convenience, fuel retail and Foodservice business and this will continue from our global headquarters and shared service centre in Blackburn under the existing leadership team.

“In Q1 we delivered another robust set of results, with strong performances in most regions and significant growth in Foodservice gross profit, which was up 10% on the prior year.

“Our future ambitions are unchanged and, following the Asda transaction, we will continue to operate across three continents and nine countries, benefiting from a strengthened balance sheet, strong cash generation and $6 billion of freehold property.

“This provides continued geographic diversification, scale and an unrivalled platform from which to grow.”