Morrisons has taken a significant step toward reducing its debt through a strategic property transaction. The grocery retailer has secured an agreement worth £331 million with Song Capital to leverage its property portfolio and decrease its debt. This move follows several financial strategies implemented by Morrisons to stabilise its finances. Key figures, including Chief Financial Officer Jo Goff, disclosed details of the transaction and its expected impact.
- The ground rent transaction involves Song Capital paying Morrisons for the income of 75 stores for 45 years.
- Despite the agreement, Morrisons will retain freehold ownership of the stores.
- The initiative will contribute to a projected 41% reduction in the retailer’s debt.
- This follows prior efforts, including the sale of Morrisons’ petrol forecourts.
Morrisons has executed a strategic £331 million ground rent transaction with Song Capital, aiming to reduce its existing debt. The retailer announced this development in its third-quarter trading update, highlighting a significant step towards financial stability. Under this agreement, Song Capital will gain income rights from 75 Morrisons stores for the next 45 years, while Morrisons retains ownership of the properties’ freeholds. This decision is part of a broader effort to manage its debt effectively.
Chief Financial Officer Jo Goff emphasised the importance of this deal, noting that the net proceeds of £331 million would allow Morrisons to retain control over its retail estate, which remains more than 80% freehold. Goff stated, ‘Today we have also announced a ground debt transaction with net proceeds of £331m. The properties will remain under Morrisons control and our retail estate remains over 80% freehold.’
The transaction is expected to facilitate a 41% reduction in Morrisons’ debt, a notable achievement following the sale of its petrol forecourts earlier in the year. This earlier sale to Motor Fuel Group for £2.5 billion was also aimed at decreasing the company’s debt load.
Morrisons’ financial strategy reflects a series of calculated decisions following its acquisition by private equity firm Clayton Dubilier & Rice. This acquisition, valued at nearly £10 billion, included the assumption of significant debt, necessitating transformation measures by newly appointed CEO Rami Baitiéh.
Since Baitiéh’s appointment, Morrisons has reported substantial progress, with a noted increase in like-for-like sales by 4.1% and a 16% rise in underlying EBITDA to £321 million in the first half of the year.
Morrisons’ strategic property transactions signify a promising move towards stabilising its financial position and reducing its debt.
