Tesco announce IFRS 16 changes

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

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