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TSCO: $6Bln Definitely Helps

02 September 2015 by lberuti

Since last fall, investors who are long TSCO ( Tesco Plc ) risk had a bumpy ride and the company’s risk premium has been rising consistently. So when it surfaced that TSCO could be near selling its South Korean business to MBK Partners for $6Bln, people greeted the news with a rare CDS tightening (-7.5bps at 212bps)! Indeed, the price tag is 10% above the most common expectations. It will enable TSCO to delever and put it back within its respective rating agencies threshold, even though a return to investment grade status is still not in the cards. One could argue that the reaction was fairly muted, but TSCO will need to reinvest into its UK proposition and an intensification of the price war in the UK cannot be ruled out.