Tesco moves to secure £2.5bn crisis warchest

29th Sep 2014 13:31

Tesco has lined up a £2.5bn banking facility as a preventive measure in case of possible ratings downgrades.According to a Sky News report, the UK's biggest retailer has signed up between four to six banks to a new credit facility intended at providing an insurance policy, as the group seeks a solution to resolve its latest crisis.The banks involved in the agreement remain unknown, though analysts have highlighted the close relationship between the supermarket giant and the likes of Barclays, Goldman Sachs, Standard Chartered, JP Morgan, ING and Bank of America Merril Lynch.The deal, which according to banking sources was completed last week, will provide the retailer with capital, which will allow the group to finance itself notwithstanding the outcome of an independent inquiry into the accounting scandal that was unveiled last week.Tesco announced that it expects its half-year profits to be in the region of £850m, rather than the £1.1bn previously estimated, which prompted some rating agencies to suggest the retail giant could be set for possible downgrades.The new bank deal temporarily replaces an existing arrangement and though it is more expensive than the original agreement, the current provision will offer additional flexibility to Tesco, as it's not contingent on downgrades on the company's credit rating.Over the weekend, Tesco released a statement saying: "We never comment on specific funding arrangements. Tesco continues to have a strong funding and liquidity position."Tesco shares closed down 1.48% to 188.72p on Monday.