Tesco pulled £3bn financing deal two days before profit warning
Tesco pulled a £3bn financing arrangement two days before announcing its third profit warning triggered by the £250m overstatement of first-half profits.
The company had been due to sign up 15 banks a week ago for a £3bn revolving credit facility.
It already has such an arrangement in place, but the inability to agree on a new facility could reduce its financial flexibility as its credit rating has been put on watch for downgrade by several rating agencies.
Tesco said: “We never comment on specific funding arrangements. Tesco continues to have a strong funding and liquidity position.”
The development comes as Dave Lewis, the new chief executive of Tesco, has told staff that Britain’s biggest retailer must change its culture, just days after it announced that it had overstated its first-half profit by £250m.
In an internal memo to staff, seen by the FT, Mr Lewis said: “Turning our business around will require change in our culture, as well as in our processes and our brand proposition.”
The former Unilever executive is expected to address Tesco’s focus on meeting short-term profit targets and its relationship with suppliers, said people familiar with the situation.
Tesco was plunged into crisis on Monday when Britain’s biggest retailer revealed the overstatement, which related to the recognition of the income that Tesco receives from suppliers, sending its shares to an 11-year low.
It has appointed Deloitte and Freshfields to lead an investigation, and has suspended four senior managers, including Chris Bush, managing director of Tesco’s UK business.
Pressure is mounting on Sir Richard Broadbent, chairman of Tesco, over the debacle, with shareholder attitudes hardening against him since the announcement.
David Herro, chief executive of US fund manager Harris Associates, and a top-15 shareholder in Tesco, said: “The chairman has been the leader of this organisation that seems to have failed at every turn.”
Sir Richard said on Monday that he had no plans to resign and it was up to shareholders to decide “whether I’m part of the solution or part of the problem”.
Headhunters have suggested John Gildersleeve, the City heavy hitter who was on the board of Tesco for 20 years, or Archie Norman, who turned round Asda, as possible candidates if Sir Richard were to step down.
Mr Lewis, asked staff in early September to suggest ways to fix the retailer. On Friday he also sought to reassure staff that he was continuing efforts to turn round Tesco, despite the latest crisis.
“I know the last few days have been difficult for us all, but I want to be clear that nothing takes away from the huge amount of passion and expertise that I know exists in this business, or from what I believe we can build in the future,” he said.
He said Tesco would be stepping up the service that it provided to customers, including having more staff available in stores, as it prepared for the crucial Christmas trading period.
“Above all, we must get back to doing our best for customers,” he said.
He added: “We want to work in a business which is open, transparent, fair and honest. We all expect Tesco to act with integrity and transparency at all times.”