Tesco share price outperforms as grocer unveils plans to buy back debt

on Oct 16, 2017
Updated: Mar 11, 2020

Shares in Tesco (LON:TSCO) have advanced in today’s session, with investors reacting positively to the company’s plans to buy back up to £700 million of its debt. The move comes as Britain’s biggest grocer looks to shore up its balance sheet as it continues with its recovery in the wake of an accounting scandal three years ago. The company recently restored its payout to shareholders as it posted a rise in half-year sales and profits.  

As of 13:26 BST, Tesco’s share price had added 0.48 percent to 186.90p, outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.08 percent higher at 7,541.42 points. The group’s shares have lost more than eight percent of their value over the past year, and are down by some nine percent in the year-to-date.

Tesco to buy back debt

Tesco announced in a statement this morning that it was launching tender offers for seven series of its sterling and euro notes, up to the amount of £700 million.

The grocer noted in the statement that the offers were “being made in the context of Tesco’s continuing efforts to strengthen the balance sheet and are aimed at efficiently using surplus liquidity to reduce gross debt”.

The Financial Times quoted one hedge fund investor as describing the tender offer as ‘very generous’. The newspaper further noted that Tesco’s bonds are currently rated as the highest rung of junk by Moody’s, S&P and Fitch, with the outlook from each marked as stable.

Analysts on Tesco

Berenberg Bank, which sees Tesco as a ‘hold,’ boosted its price target on the stock from 180p to 190p earlier this month, while Deutsche Bank reiterated its ‘buy’ rating on the shares, with a valuation of 240p. According to MarketBeat, Britain’s biggest grocer currently has a consensus ‘hold’ rating and an average price target of 192.56p. 

As of 13:55 BST, Monday, 16 October, Tesco PLC share price is 187.10p.