Concern remains over debt burden

Sainsbury’s stalker, Qatari fund Delta Two, is willing to increase the proportion of equity in its£10.6 billion takeover proposal and cut the level of debt funding.

The concession would go some way to countering concern that, should Delta Two win control of the grocer, the core supermarket business would not carry a debt burden that would put it at a significant disadvantage against rivals.

However, the exact level of debt that would be acceptable in any offer is still being discussed. Sainsbury’s board would like Delta Two to increase the proportion of equity by about£1 billion, but the fund may not be prepared to accept such a big increase.

Until now, Delta Two had planned to fund the deal with£6 billion of debt and£4.6 billion of equity and payment-in-kind shares.

Turmoil in the global debt markets means that Delta Two’s backers, Credit Suisse, ABN Amro and Dresdner Kleinwort are likely to raise the cost of its debts.