Morrisons, a prominent supermarket chain, announces a strategic property agreement aimed at reducing its substantial debt.
- The retailer aims to decrease its debt by £331 million through a 45-year ground rent collaboration with Song Capital, an investment firm.
- This initiative involves 75 Morrisons store properties, allowing the supermarket to maintain freehold ownership while generating income for Song Capital until 2069.
- Jo Goff, Chief Financial Officer, highlights the company’s robust quarter performance and emphasizes the importance of the debt reduction move.
- This transaction follows earlier deleveraging efforts, particularly from Morrisons’ forecourt business disposal.
Morrisons has strategically aligned with Song Capital, finalizing a 45-year ground rent deal that is projected to diminish its debt by an impressive £331 million. This significant move is designed to leverage 75 of the supermarket’s store properties, contributing an income stream to the investment firm until 2069, while Morrisons retains control over its store freeholds.
As of the quarter ending 26 September, this agreement was disclosed parallel to Morrisons’ latest financial results. Stakeholders were reminded of the acquisition by Clayton Dubilier & Rice in October 2021, which included a condition barring the disposal of store freeholds; a stipulation that has since lapsed, allowing for this financial maneuver to proceed. Morrisons thereby secures a cash influx, fortifying its fiscal position.
Jo Goff, the Chief Financial Officer of Morrisons, stated, ‘Every part of Morrisons – supermarkets, online, convenience, wholesale and Myton Food Group – showed good growth in the quarter, representing a robust performance across a diversified business. Today we have also announced a ground debt transaction with net proceeds of £331 million.’ Through this approach, Morrisons illustrates a concerted effort in debt reduction while maintaining substantial control over its retail estate, as over 80% remains freehold.
This arrangement follows a similar financial restructuring earlier in the quarter with the sale of its forecourt business. The cumulative effect of these transactions positions Morrisons to possibly lower its debt to £3.6 billion, reflecting a commendable 41% reduction from its previous peak. With expectations of increased EBITDA and operational advancements laid out for the year ahead, Morrisons continues to focus on fortifying its economic standing.
Morrisons’ collaboration with Song Capital underscores its commitment to financial robustness and strategic growth.
