Morrisons, a leading supermarket chain, has made a significant move to reduce its debt by engaging in a strategic property deal.
- The company announced a 45-year ground rent agreement with Song Capital, an investment firm, involving 75 stores.
- Morrisons will retain the freehold ownership of these properties, ensuring control over its retail estate.
- The deal comes after the expiration of an earlier condition which restricted the disposal of stores’ freeholds.
- Proceeds from this transaction will significantly impact Morrisons’ financial strategy, reducing its debt by £331 million.
Morrisons has embarked on a strategic property venture to alleviate its financial burdens. A 45-year ground rent agreement has been secured with Song Capital, allowing the investment firm to earn an income stream from 75 of Morrisons’ store locations until 2069. Despite this agreement, the supermarket chain retains full control over its property freeholds, a critical factor in maintaining its operational independence.
This news was disclosed alongside Morrisons’ quarterly report, marking a pivotal point in the company’s financial landscape. Bought out by Clayton Dubilier & Rice for nearly £10 billion in October 2021, Morrisons initially faced a stipulation preventing the selling of store freeholds. However, with this condition now lapsed, the supermarket is poised to benefit from a substantial £331 million cash influx.
Jo Goff, Morrisons’ Chief Financial Officer, expressed confidence in the company’s broad-based growth, citing robust performances across various sectors such as supermarkets, online, convenience stores, wholesale, and the Myton Food Group. She noted, “Every part of Morrisons showed good growth in the quarter, representing a robust performance across a diversified business.”
Goff further detailed that the properties involved in the transaction remain largely under Morrison’s control, with over 80% of the retail estate being freehold. This transaction follows earlier debt reduction activities, including the sale of their forecourt business at the quarter’s onset.
With these strategic financial adjustments, if the proceeds from the current transaction are applied to debt reduction, Morrisons’ debt would stand at £3.6 billion, marking a 41% decrease from its peak levels. Looking ahead, the company anticipates increased EBITDA and further operational advancements throughout the remainder of the fiscal year.
This strategic property arrangement marks a significant stride for Morrisons towards reducing debt and enhancing its financial stability.
