Issa Brothers’ EG Group to Tap Private Debt as KPMG Audit Stalls

(Bloomberg) -- EG Group, the gas-station operator owned by the British Issa brothers, is planning to sell 675 million pounds ($956 million) of privately placed bonds to help fund an acquisition spree after an auditing delay by KPMG LLP derailed the prospect of tapping the public market.

EG Group plans to issue five-year senior-secured bonds in its first privately placed transaction, which are expected to price with a coupon of around 6.25%, according to people familiar with the matter. The deal will help fund a turbocharged expansion by the company, which owns the U.K. supermarket chain Asda Group Ltd., and forms part of a $1.8 billion debt package to finance the purchase of Asda’s gas stations as well as those owned by OMV in Germany.

Representatives for EG Group and KPMG declined to comment when contacted by Bloomberg News.

The company owned by Zuber and Mohsin Issa has fueled its expansion at break-neck speed in the debt markets since 2017. Earlier this week, EG Group told investors it needs more time to finish its audit results because KPMG -- which replaced Deloitte & Touche LLP as the firm’s accountants in October -- faced delays in assessing the scale of its business.

Companies typically need to publish a prospectus with audited statements when they sell listed bonds to investors, meaning that the KPMG delay led the company to opt for the private route.

Read More: EG Group to Hold Investor Call After Shock of Deloitte Quitting

With a coupon of 6.25%, the bond is offering investors a premium for the paper being less liquid than a publicly listed bond. EG Group’s existing bonds denominated in euros and U.S dollars are currently bid at yields ranging from 4.3% to 5.2%, according to data compiled by Bloomberg.

Strong investor appetite for the new sterling bond meant that the borrower was able to increase the size of the offering by more than a 100 million pounds, according to some of the people.

The deadline for EG Group’s audit is the end of September, people familiar with the matter said. Until the audit is completed, any plans to lower debt costs by issuing publicly syndicated bond deals will likely be hindered. Private offerings are more expensive for borrowers to sell because investors can only typically hold a small amount of illiquid assets in their portfolios.

EG Group was bought by the Issas in 2001 and is now part-owned by sponsor TDR Capital. The brothers and TDR Capital are also said to be in talks to buy more than half of coffee chain Caffe Nero’s 350 million pounds of loans, the Telegraph reported earlier this week.

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