Tesco's borrowing costs soar as bonds plunge

London

TESCO Plc's battle to retain its investment-grade status is driving up borrowing costs for a company saddled with more than £16 billion (S$32.9 billion) of debt.

Tesco bonds plunged and the cost of insuring them against default soared last week after Moody's Investors Service cut the biggest UK grocer to one level above junk and warned that a further downgrade could follow unless its financial position improves. Cuts were also announced by Fitch Ratings and Standard & Poor's.

The moves increase pressure on chief executive officer Dave Lewis to raise capital quickly, either by selling assets or offering shares to existing stockholders. At five times earnings before interest, taxes, depreciation and amortisation, according to Moody's, Tesco has the highest financial leverage of any …