Supermarket giant Sainsbury’s is issuing £250m of convertible bonds in a bid to fill a deficit in its pension fund.
The grocer said the proceeds will be used “for the general corporate purposes of the group” including “contributions to the group’s pension funds.” As of March 14 this year, the retailer’s post-tax pension deficit stood at £651m, although it said that was a £28m improvement on the previous year.
Sainsbury’s said the bonds will have no fixed redemption date and can be converted into fully paid new or existing shares in the retailer. Bond holders must convert them at least seven days ahead of the reset date, in July 2021.
The bonds will have an expected yield of between 2.5% and 3% until that point, Sainsbury’s said this morning.
The initial conversion price is expected to be at a premium of between 30% and 35% to the volume weighted average price of the ordinary shares on the London Stock Exchange between launch and pricing.
Bonds will be listed on the Channel Islands Securities Exchange Authority Limited before the first interest payment date.
Deutsche Bank, Morgan Stanley and UBS are acting as joint bookrunners.