Morrisons new owners look to speed up refinancing despite profits warning

Morrisons’ release of financial results, including a warning over inflation and the war in Ukraine, will kick-start a major process by its private equity owners to refinance the company’s debt, The Grocer understands.

Sources said despite the gloomy predictions in the update given yesterday, it had “cleared the way” for private equity giant Clayton, Dubilier & Rice (CD&R), spearheaded by ex-Tesco boss Sir Terry Leahy, to seek bank support to refinance more than £6bn of short-term borrowing taken out to finance the £7bn takeover in October.

Morrisons issued what one analyst called a “chilling” statement about the impact of the war and pressures of soaring supplier costs, also revealing that sales in store and online were down more than 6% in the 13 weeks to 10 January.

However, it was hopeful investors would accept there are tough comparisons to be made between the same period last year because of the impact of the pandemic.

The statement said it was difficult to predict how long the problems would last, and that unless conditions improved, it could face a “material adverse effect” on sales and earnings for the year.

Whilst Morrisons no longer has to abide by rules for listed companies in its results, it is understood the publication of the results is seen as clearing the way for talks on the refinancing process.

It comes with another stumbling block in the form of the CMA’s claim that the takeover could lead to higher prices at the UK’s petrol pumps – expected to be solved with the sale of forecourts in the 121 locations named by the watchdog.

Meanwhile, sources at Morrisons and CD&R both refused to comment over reports the private equity giant has appointed advisors to oversee the sale of £500m worth of the supermarket’s manufacturing and distribution facilities across the UK.

As part of efforts to secure the backing of pension trustees and other stakeholders, CD&R pledged not to undertake substantial sales and leasebacks of Morrisons’ stores.

Shore Capital analyst Clive Black said yesterday’s statement had “dampened the overall mood music” for the sector.

However, Amira Freyer-Elgendy, consumer analyst at GlobalData, said the results pointed to particular problems with Morrisons’ competitiveness with rivals such as the discounters and Tesco.

“Morrisons lost out over Christmas and its competitors have scooped up shoppers looking for better value for money amidst the price hikes,” said Freyer-Elgendy.