Monday 15 June 2015 6:22 am

Tesco must find £5bn to rebuild its balance sheet, says Moody's

Troubled Tesco will need to find £5bn in order to relieve the pressure on its overstretched balance sheet, according to credit ratings agency Moody's.

Read more: Here's what assets has Tesco sold off and what's heading to the checkout

"It has a relatively high level of debt – also adjusted debt, such as the pension deficit and operating leases. It is a relatively high-leveraged company," analyst Sven Reinke said.

"That was acceptable for an investment grade company until now because they had decent profit margins."

Reinke also added that the retailer is expected to raise about £4bn from the sale of its South Korean business, and £1bn for the sale of its stake in data business Dunnhumby.

Read more: Former Tesco asset Blinkbox Music goes into administration less than six months after sale

Tesco has already sold off a number of assets such as its troubled digital entertainment business Blinkbox, its fleet of jets private jets – and it's also closing its remaining Homeplus stores in the UK..

Earlier this year, Moody's relegated the retailer's debt to junk status, citing the extremely competitive retail landscape.

Read more: Moody's thinks Tesco, Sainsbury's, Asda and Morrisons' profit margins will continue shrinking

"Structural changes in the UK grocery retail market will continue to challenge the company's operating performance even with the benefits of significant restructuring actions," it said.

"Moreover, we think that the company's efforts to stabilise the UK operations and to protect the balance sheet, while helpful, will take time to implement."

Tesco is expected to report another fall in sales when it publishes its next figures on June 23.