Tesco Taps Banks for £2.5bn to Protect Against Potential Ratings Downgrade Impact

Tesco has tapped banks for a £2.5bn credit facility in a bid to protect against potential ratings downgrades caused by its £250m shortfall in profits.

According to sources, cited by Sky News, Tesco has convinced up to six banks to expand its existing credit facility, but Britain's biggest retailer has had to pay a higher fee for the service to guarantee its flexibility.

This includes the facility not being contingent on downgrades to its credit rating or breaching other borrowing terms and conditions.

Tesco shares tumbled on 23 September despite the troubled British retailer revealing that it has parachuted in the former chief financial officer for Marks & Spencer, Alan Stewart, to help turn around the company.

Stewart was brought in more than two months ahead of schedule after Laurie McIlwee left just over a week ago.

Tesco had already cut its full-year profit forecast from £2.8bn (€3.6bn, $4.6bn) to £2.4bn in August.

It has also since suspended four executives, including UK managing director Chris Bush, while media reports have speculated that the others include food commercial director John Scouler and the head of food sourcing, Matt Simister.

Tesco has also launched an internal investigation, led by Big Four accountancy firm Deloitte.

The Financial Reporting Council said it is observing the developments and may launch a probe after the results of the internal investigation are published.

Since then a report revealed that a whistleblower had notified the group about concerns over its profit declarations but was "ignored for months".