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Sainsbury Said to Seek $1.6 Billion Loan as Interest Rates Fall

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Jan. 15 (Bloomberg) -- J Sainsbury Plc is seeking a credit line of as much as 1 billion pounds ($1.6 billion) to replace an existing facility as banks offer Europe’s largest companies the lowest borrowing costs in more than five years.

The U.K.’s second-largest grocer is in talks with the lenders that provided its 690 million-pound credit line in 2010, according to two people with knowledge of the matter, who asked not to be identified because the negotiations are private. The company hasn’t selected banks to arrange the financing or proposed an interest rate, the people said.

Sainsbury follows Tesco Plc, the U.K.’s largest supermarket chain, in seeking to replace loans to take advantage of cheap rates offered by banks competing to lend to Europe’s biggest companies. The region’s investment-grade borrowers paid an average margin of 63 basis points, or 0.63 percentage points, on their credit lines last year, the lowest since 2007, according to data compiled by Bloomberg.

Tom Parker, a London-based spokesman for Sainsbury, declined to comment on the financing.

Barclays Plc, HSBC Holdings Plc, Lloyds Banking Group Plc, Rabobank International and Royal Bank of Scotland Group Plc arranged Sainsbury’s existing credit line that matures in October 2015, Bloomberg data show.

Interest Rates

Interest margins on loans to large corporates in the U.K. dropped in the final quarter of 2013, the Bank of England said in its Credit Conditions Survey published Jan. 8. Lenders expect spreads to fall further in the first three months of this year, according to the poll.

Tesco obtained a 2.6 billion-pound five-year credit line in August that pays an interest margin of 50 basis points more than the London interbank offered rate, Bloomberg data show.

Sainsbury’s market share in the four weeks to Jan. 5 increased to 17.7 percent, overtaking Wal-Mart Inc.’s Asda, Citigroup Inc. analysts said, citing Kantar Worldpanel data.

To contact the reporters on this story: Stephen Morris in London at smorris39@bloomberg.net; Esteban Duarte in Madrid at eduarterubia@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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