Billionaire Issa brothers’ EG Group sells $1.5 billion in property in bid to slash debt burden
The billionaire Issa brothers’ business EG Group has sold $1.5 billion worth of property in the US as the pair scramble to bring down the firm’s debt burden amid soaring interest rates.
EG Group, which runs hundreds of petrol stations in the UK as well as the Leon fast food brand, said it had sold 415 store assets in the US to property company Realty Income, in a deal which will see it lease the assets back for a $103 million annual rental fee.
EG Group said the move, which represents a sale of around 15% of its property empire, was part of its “commitment to reduce total net leverage through debt reduction and free cash flow generation.”
Zuber Issa, co-founder of EG Group, said: “Today’s announcement demonstrates the progress we continue to make to put in place a robust capital structure for the medium term that will underpin our long-term strategy and represents an important first step in this process.”
It comes after an Evening Standard analysis found the company could face increased interest payments of as much as $250 million (£202 million) per year in 2023.
EG Group has at least $9 billion of debt, according to its most recent quarterly report. The majority is made up of loans with interest pegged to LIBOR, EURIBOR and SONIA, indices representing the rate at which banks lend to each other. These rates have as much as quadrupled in the past five months, leading to hundreds of millions in increased debt interest.
Sandeep Dhingra, CEO of capital markets insight business FactEntry, said the firm could find it difficult to refinance its debt without paying higher interest rates than before.
“It’s not a good time to have this much debt on your plate -- you have to hope you can grow the business to cover up that liability,” he said.
Investors appear to have welcomed the news of sale, with EG’s euro bond rising 1.7 cents to 95.8 cents, the highest single-day rise since April 2020.