Tesco has revealed the full impact of the new lease accounting standard on their balance sheet.
SUPR view:
- IFRS 16 adjustments in line with expectations
- Total debt up £10.5bn due to lease liability
- Total “lease adjusted” debt increases to £15.8bn or 4x EBITDA
- Creates incentive on Tesco to buyback property ie lease interest rate 5.8% v 4.0% bond yields
- Tesco is now investment grade on Moody’s metrics (Baa3)
- Already IG on Fitch
