New long-term financing

Sainsbury(J) PLC
24 February 2006





24 February 2006



Proposed new long-term financing - issue of two Commercial Mortgage Backed
Securities (CMBS)



Highlights

•     Proposed refinancing to raise up to £2.07 billion of secured debt,
      expected to be highly rated (5)

•     Buy back up to £1.7 billion outstanding unsecured bonds rated BBB- (S&P)
      and Baa3 (Moody's)(6)

•     Agreed with pension schemes' trustees a one-off contribution of £350
      million into pension schemes

•     CMBS will be secured indirectly against 127 supermarkets with investment
      value of £3.55 billion (7) representing approximately half the net book 
      value of Sainsbury's supermarkets

•     Operational flexibility maintained over secured properties, which remain
      on balance sheet

•     Group interest costs (8) are estimated to reduce by up to £12 million per
      annum from 2006/07

•     Estimated one-off costs of £37 million pre-tax (£17 million cash) in 2005/
      06



J Sainsbury plc has today announced plans to raise new secured debt of up to
£2.07 billion.  Simultaneously, the company is offering to purchase its
outstanding unsecured bonds totalling £1.7 billion and make a one-off gross
contribution of £350 million into the company's pension schemes.  The proposed
financing will involve the issue of two highly rated CMBS, which will be secured
indirectly (5) against approximately half of the net book value of Sainsbury's
supermarket portfolio.



The CMBS market has developed rapidly over the past few years, with improved
liquidity and depth of investor participation.  The CMBS structure enables
Sainsbury's to raise finance at a lower cost than currently available in the
unsecured credit market and provides the company with a flexible financing
platform for the future. The net effect is an estimated interest saving of up to
£12 million per annum from 2006/07.



Sainsbury's has agreed with the company's pension schemes' trustees to use some
of the new funds arising from the refinancing to make a one-off contribution of
£350 million into the pension schemes which, together with additional annual
deficit payments, are designed to fund the last reported deficit of £582
million, calculated under IAS 19 as at 8 October 2005.  Further details are
contained in a separate announcement released today.



Commenting on the proposed transaction Darren Shapland, chief financial officer
said, 'These proposals provide us with cost effective long-term finance by
unlocking value from our property portfolio.  We are retaining ownership of
these valuable assets and keeping them on our balance sheet.  In addition we
will maintain significant operational flexibility as we will have the right to
substitute, withdraw or dispose of properties.  The proposed refinancing will
reduce our annual interest costs and enable us to inject a substantial sum into
our pension fund. This improves the long term funding profile of the business
and provides a flexible financing platform for the future as well as
underpinning the Making Sainsbury's Great Again plan as we continue to improve
our offer to customers.'



Enquiries:

Investor relations                                    Media

[phone]                             [phone]
Lynda Ashton                                     Pip Wood


--------------------------------------------------------------------------------
A conference call will be held for analysts and investors at 10:30 (GMT) on
Friday 24 February 2006. To listen to this conference call: please dial +44 (0)
20 7365 1851 at least ten minutes prior to the start of the call. You will be
asked to give your name and company details.  You will then be placed on hold
and will hear music until the conference call starts.  A replay of this event
will be available from 14:30 GMT until midnight GMT on Wednesday 1 March 2006.
To listen, please dial [phone], and enter pin number 8489732. 
Please note that only members of the investment community will have the
opportunity to participate in the Q&A session. To listen to the audio webcast:
Please visit www.j-sainsbury.co.uk and follow the on-screen instructions. The
archive of this event will be available from 15:00 GMT on the day in the form of
a delayed webcast. To view the transcript of the conference call: Go to www.j-
sainsbury.co.uk on Tuesday 28 February 2006 and follow the on-screen
instructions.


Background

Under the cash tender announced today Sainsbury's is offering to buy back any
and all of its £1.7 billion outstanding unsecured bonds, including £800 million
of maturing bond obligations in 2007/08.  The bonds tendered will be funded by
the proceeds of two new CMBS securitisations which will be secured indirectly
against approximately half of the book value (7) of Sainsbury's supermarket
portfolio.  These properties have a current investment value of £3.55 billion
and consist of 127 freehold and long leasehold supermarkets.



The CMBS market provides the company with a cost effective, reliable and
flexible funding platform with which to finance the business in the future.  As
a result of the change from an unsecured to a secured debt structure,
Sainsbury's on going interest costs are estimated to be reduced by up to £12
million per annum (8).  The properties securing the new debt will continue to be
controlled by Sainsbury's and remain on balance sheet.  Operational flexibility,
including the ability to develop store formats and location mix, will be largely
preserved.



As a result of the proposed refinancing it is expected that Sainsbury's will
incur a pre-tax one-off cost of £37 million in 2005/06.  This includes cash
costs of approximately £17 million arising from the difference between the
redemption value and the book value of the outstanding bonds, net of swaps and
non-cash cost of approximately £20 million relating to a tranche of a bond which
is economically hedged, but does not qualify for hedge accounting.  The
transaction costs will be amortised over the life of the CMBS and are included
in the net interest savings.



Securitisation

The CMBS will be secured indirectly against 127 freehold and long leasehold
supermarkets which will be transferred to two new property subsidiaries of
Sainsbury's.   The expected new issue of up to £2.07 billion CMBS will comprise
of two separate transactions:



•     £1.2 billion 12 year floating rate notes (including a euro denominated
tranche equivalent to approximately £400 million) issued by a newly incorporated
special purpose vehicle, Eddystone Finance plc, with a 7 year issuer call.  If
the issuer does not refinance the transaction at the end of year 7, there will
be an increased coupon and accelerated amortisation.  These notes will, via a
secured loan structure, have the benefit of security granted over approximately
75 freehold and long leasehold supermarkets with a market value of approximately
£2.0 billion



•     £0.87 billion 25 year fixed rate notes issued by a newly incorporated
special purpose vehicle Longstone Finance plc.  These notes will, via a secured
loan structure, have the benefit of security granted over approximately 52
freehold and leasehold supermarkets with a market value of approximately £1.55
billion



Each of the new CMBS transactions will include tranches of notes which are
expected to be rated AAA/Aaa, AA/Aa2 and A/A2 by S&P and Moody's respectively.



The CMBS offer is expected to close on 24 March 2006.



Morgan Stanley & Co International Ltd and UBS Limited are acting as joint
bookrunners and joint lead managers for the new CMBS issue.



Highbury Finance BV 2023 (Highbury) and Dragon Finance BV 2023 (Dragon)

There are two existing securitisations, Highbury and Dragon, involving stores
occupied by Sainsbury's, in which the ratings of the securitised notes are
exposed to the credit quality of Sainsbury's.  Sainsbury's has agreed to seek
changes to the existing transactions that allow the ratings of the Highbury and
Dragon notes to be rated independently of the ratings of Sainsbury's, with an
expected rating of Baa3 (Moody's).  Sainsbury's understands that the Highbury
and Dragon issuers will be making separate announcements of their own.



Cash tender process

Sainsbury's is offering to buy back any and all of its £1.7 billion outstanding
unsecured Bonds (6) currently rated BBB- by S&P and Baa3 by Moody's and through
a tender process at a premium to current trading levels.  Details are set out in
the tender offer and consent solicitation memorandum dated 24 February 2006.
The tender offer is conditional upon the success of the CMBS.








ISIN                     Amount Series of notes                                  Repurchase     Early repurchase
                                                                                                      spread (a)
                           £(m)                                                  spread (a)
XS0185282158             314.50 £314,500,000 5.25%. Notes due 2007                  + 40 bp              + 30 bp
XS0132124735             487.00 €800,000,000 5.625%. Notes due 2008                  +30 bp               +20 bp
XS0132125112             300.00 £300,000,000 6.50%. Notes due 2012                   +95 bp               +90 bp
XS0145149703             250.00 £250,000,000 6.125%. Notes due 2017                 +110 bp             + 105 bp
XS0145149539             350.00 £350,000,000 6.00%. Notes due 2032                  +140 bp              +135 bp
            Total      1,701.50

(a) Versus benchmark reference securities: UKT 4.5 per cent 2007, DBR 4.125 per
cent 2008, UKT 5 per cent 2012, UKT 4.75 per cent 2015 and UKT 4.25 per cent
2032, respectively



Sainsbury's intends to purchase bonds submitted into the tender offer prior to
the early submission date at the repurchase price plus an early submission
amount (together the early repurchase price).  Any bonds submitted after the
early submission date and prior to the expiration of the tender offer will be
purchased at the repurchase price.  The early repurchase price and the
repurchase price will be determined by reference to the early repurchase spreads
and the repurchase spreads respectively (the early submission amount will be the
difference between the early repurchase price and the repurchase price).



In conjunction with the tender offer, Sainsbury's is inviting bondholders to
approve proposals to amend the terms and conditions of the unsecured bonds to
provide for the early redemption of bonds not tendered into the offer.  The
proposed modification will allow Sainsbury's to have the option to redeem bonds
outstanding at the completion of the tender offer.  Any such redemption would be
at the repurchase price; holders who submit valid voting instructions prior to
the early submission date would also be eligible to receive the early submission
amount payable only in the event of redemption. The offer to purchase is not
contingent upon receipt of necessary votes to pass the proposals.  Provided the
CMBS is successful Sainsbury's intends to repurchase any and all bonds which
accept the tender offer, irrespective of obtaining approval for the proposed
modifications.



The tender offer is expected to close simultaneously with the CMBS issue.



Morgan Stanley & Co International Ltd and UBS Limited are acting as joint dealer
managers in relation to the tender offer and consent solicitation process.



Properties included within the secured structure

The properties to be included within the secured structure are broadly spread
across England and Wales.  Under the new Sainsbury's structure, Sainsbury's
Supermarkets Ltd (the operating company) will enter into newly drafted long-term
leases for each of 127 participating supermarkets.
                                                     Freehold        Long lease            Total       Investment
                                                 supermarkets      supermarkets     supermarkets
                                                                                                     value (£'bn)
£1.2 billion floating rate notes                           67                 8               75             2.00
£0.87 billion fixed rate notes                             48                 4               52             1.55
Total                                                     115                12              127             3.55



Expected Timetable

Date                           Event

24 February 2006               Deal announced

24 February 2006               Tender offer to existing unsecured bondholders
1 March - 9 March 2006         Investor roadshow and marketing
20 March 2006                  Pricing date
24 March 2006                  Closing date for tender and redemption (if applicable) of J Sainsbury plc £1.7
                               billion unsecured bonds
24 March 2006                  Closing date for £2.07 billion CMBS





Notes

(1)      Morgan Stanley & Co International Limited (Morgan Stanley) and UBS
Limited (UBS) are acting as financial advisers to J Sainsbury plc and no-one
else for the purposes of the transaction.  They will not be responsible to
anyone other than J Sainsbury plc (whether or not a recipient of this
announcement) for providing the protections offered to clients of Morgan Stanley
or UBS nor for providing advice in relation to the transaction.  Any existing
bondholder or prospective purchaser interested in buying the new securities is
recommended to seek its own financial advice.

(2)     This announcement is being distributed by J Sainsbury plc only to, and
is directed only at, (a) persons who have professional experience in matters
relating to investments who fall within Article 19(1) of the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2005 and (b) persons to whom it
may otherwise lawfully be communicated (together 'relevant persons'). Any
investment or investment activity to which this announcement relates is
available only to and will be engaged only with, relevant persons. Any person
who is not a relevant person should not act or rely on this announcement or any
of its contents.  The information and any opinions contained in this
announcement do not constitute a public offer under any applicable legislation
or an offer to sell or solicitation or an offer to buy any securities or
financial instruments. The information contained in this announcement is subject
to, and must be read in conjunction with, the information contained in the full
offer documents to be issued in relation to the matters referred to in this
announcement.

(3)     This announcement is not for publication or distribution, directly or
indirectly, in or into the United States. This announcement is not an offer of
securities for sale into the United States. The securities referred to herein
may not be offered or sold in the United States unless they are registered or
exempt from registration pursuant to the US Securities Act of 1933. There will
be no public offer of these securities in the United States.

(4)    Certain statements made in this announcement are forward looking
statements.  Such statements are based on current expectations and are subject
to a number of risks and uncertainties that could cause actual results to differ
materially from any expected future results in forward looking statements.

(5)    The CMBS issuers will be Eddystone Finance plc and Longstone Finance plc,
special purpose vehicles not part of the Sainsbury's group.

(6)    The credit ratings assigned to Sainsbury's by Standard & Poor's Rating
Service (S&P) and Moody's Rating Investor Service (Moody's) are currently BBB-
and Baa 3 respectively, with negative outlook.

(7)     The secured property pool consists of 127 retail supermarket properties
located throughout England and Wales, comprising 12 long leasehold and 115
freehold properties.  Atisreal has carried out the property valuation as at 23
February 2006.  These supermarkets had a book value of £2.3 billion as at 26
March 2005.

(8)    The interest savings have been calculated by comparing the current cost
of the £1.7 billion outstanding bonds, net of swaps, at rates consistent with
the company's current unsecured credit rating with the estimated costs on the
proposed £1.7 billion securitisation, net of swaps.





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