Morrisons has undertaken strategic initiatives to alleviate its debt of 41% through a significant property transaction.
- The supermarket chain entered an agreement with Song Capital, involving 75 stores for a duration of 45 years.
- Morrisons retains ownership of store freeholds, ensuring control over its retail estate remains largely freehold.
- The transaction aligns with previous moves to reduce debt, like the sale of petrol forecourts to Motor Fuel Group.
- Following the acquisition by CD&R, Morrisons is implementing transformation plans under new leadership to regain stability.
Morrisons has taken a definitive step towards reducing its debt by 41% through a substantial property transaction, valued at £331 million. The deal is with Song Capital, a real estate investor, allowing Morrisons to tap into its property portfolio while maintaining ownership of its stores’ freeholds. This transaction is part of Morrisons’ broader strategy to manage its financial liabilities and secure its future.
Under the terms of the agreement, Song Capital will pay £331 million for the income generated by 75 Morrisons stores over the next 45 years. Despite this long-term income arrangement, Morrisons retains control of the freehold of these properties, ensuring that it remains largely freehold at over 80%. This move is part of a series of initiatives focused on reducing the company’s debt, following the recent sale of its petrol forecourts.
Jo Goff, Morrisons’ Chief Financial Officer, highlighted the significance of this transaction in the company’s quarterly trading update. She noted that, on a pro-forma basis, the deal will reduce Morrisons’ debt to £3.6 billion, further fortifying the company’s financial position.
This development follows the acquisition of Morrisons by Clayton Dubilier & Rice (CD&R) for nearly £10 billion, which included substantial debt. Since this acquisition, Morrisons has faced various challenges. In response, the company appointed former Carrefour boss, Rami Baitiéh, as its new Chief Executive. Baitiéh has been spearheading transformation plans, aiming to stabilise the grocer and improve its financial health.
There are already signs of progress under Baitiéh’s leadership. Morrisons reported a solid quarter of progress in June, with like-for-like sales rising by 4.1% and underlying EBITDA increasing by 16%, amounting to £321 million for the first half of the year. This performance suggests that the measures being implemented are beginning to yield positive results.
Morrisons’ strategic property deal demonstrates a proactive approach to debt management, aligning with its ongoing transformation efforts.
