Morrisons has implemented a significant property agreement aiming to slash its debt burden by a substantial 41%.
- The company has engaged in a £331 million ground rent transaction with Song Capital, safeguarding ownership while monetizing store revenue.
- Despite the transaction transferring income rights, Morrisons maintains control of its retail estate over 80% as freehold.
- The debt reduction aligns with earlier measures like the divestment of petrol forecourts for a notable £2.5 billion.
- Morrisons’ new CEO, Rami Baitiéh, has led strategic transformations, resulting in promising financial indicators, including increased sales and EBITDA.
Morrisons has taken a decisive step to manage its financial liabilities by securing a £331 million ground rent transaction with Song Capital. This move is part of a broader strategy to reduce the supermarket chain’s debt, particularly after its acquisition by Clayton Dubilier & Rice. By these transactions, Morrisons will minimize its debt burden while retaining ownership over 75 of its stores’ freeholds for the next 45 years.
This innovative arrangement allows Morrisons to benefit from its existing assets without losing control. Song Capital is set to receive the income generated by these properties, enabling Morrisons to employ the proceeds to decrease its debt by an impressive 41%. Chief Financial Officer Jo Goff emphasized the strategic nature of this deal, stressing that the company’s retail estate remains predominantly freehold, maintaining operational stability and control.
Earlier in the year, Morrisons made headlines by selling its petrol forecourts to Motor Fuel Group, a transaction valued at £2.5 billion. This move was yet another strategic measure aimed at debt reduction, showcasing Morrisons’ commitment to financial restructuring. The proceeds from this sale were integral in decreasing the existing debt, contributing significantly to the 41% reduction.
Leadership under the new chief executive, Rami Baitiéh, has been pivotal in these transformative efforts. Appointed to rejuvenate the company, Baitiéh’s strategies have begun showing fruition. Recent financial results reflect a positive trajectory, with like-for-like sales experiencing a 4.1% rise, and underlying EBITDA increasing by 16% to £321 million in the first half of the year. This progress underscores the effectiveness of the initiatives undertaken under his leadership.
Morrisons’ strategic financial maneuvers highlight its robust approach to debt management and operational resilience.
