British supermarket group Morrisons [LON:MRW] is issuing £800 million equivalent of 5.5-year sterling- and euro-denominated senior secured facilities. The bonds are set to price today (Thursday), final guidance is 8.75%-8.875% on the sterling notes and 6.75%-6.875% on the euro notes. The rating on the notes is expected to be B1/B+/BB-, non-call for two years.
The issue is part of Morrisons’ plan to raise a total of £1.05 billion and use the proceeds to tender existing GBP and EUR senior secured notes worth £800m due in November 2027 and repurchase an existing £424m worth of unsecured debt. Total leverage is expected to remain broadly unchanged at 5.1 times EBITDA of £630m over the last twelve months.
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Morrisons is coming to the bond market from a strong position having recently reported another quarter of sales growth. The UK’s fifth largest grocer, which has been owned by US private equity firm Clayton, Dubilier & Rice since 2021, saw a 3.9% rise in like-for-like sales in the quarter ending in April. This follows on a 2.1% increase in the first quarter.
The supermarket chain has been growing sales steadily over the last few years from £14.4bn in 2022 to £15.5bn in 2025. Underlying EBITDA increased by 9.2% CAGR during that period to £858m with EBITDA margin at 5.5%.
Now one of the top five supermarket chains in the UK Morrisons holds an 8.4% share of the UK grocers’ market and an 11%-12% share of the online market.
During the last four years a couple of strategic decisions helped the company consolidate its position. The acquisition of the McColl’s convenience store chain in 2022 boosted the scale and density of Morrisons’ stores while the £2.5bn sale deal of its petrol stations last year paid off by creating more predictable earnings and cash flow. More recently, the supermarket chain has actively embraced AI advances by incorporating an AI-based product locator into its service provisions.
UK grocery market expected to strengthen this year
While UK consumers remain slightly cautious on the back of the previous rise in inflation and the unemployment rate nudging slightly higher, albeit from historic lows, the UK consumer spending landscape is gradually improving on the back of higher household incomes and falling interest rates.
Bank of England interest rates are expected to drop by 3.75% by the end of 2025, inflation is likely to remain around 2.5%, the past loosening of the labour market should feed through to slower wage growth and the overall economy is projected to grow by 1.1% year on year. This is creating a positive context for UK supermarkets with increased consumer spending expected over the coming quarters and the overall grocery market expected to grow close to 4% year-on-year.
Issuance remains strong in July
The corporate bond market has really picked up this year with new bond issuances hitting the highest level in months. New issuances totalled £41.73bn in June with the financial services sector alone accounting for £35.14bn worth of newly issued notes and healthcare companies, industrials and consumer goods firms making up a large portion of the rest of the issues.
Morrisons’ issue, True Potential earlier this week and Arqiva last week are indicative of the trend continuing into July before the seasonal summer slowdown in August.
