Supermarket giant Morrisons is facing a £100m bulge in its borrowing costs as market volatility takes further toll on the debt-laden business.
Since its acquisition by private equity firm CD&R, more than half of the grocer’s longer-term debts have been left floating and it has not hedged its interest, according to reporting by The Sunday Times.
Ratings agency Moody’s has estimated that a jump in lending rates as a result of ongoing market volatility could push Morrisons’ annual interest expense from £35m to £335m. It also has an existing debt pile of £6.6bn.
Moody’s also forecast that for every 25 basis point rise in interest rates, Morrisons annual interest would increase by £7m or £8m. The Bank of England is expected to double interest rates to 4.25% this year.
A sudden rise in borrowing costs could also affect CD&R’s longer-term goals to sell and lease back Morrisons warehouse and food manufacturing sites.
Since its acquisition by CD&R, Morrisons has struggled. At its most recent financial update for the third quarter, profit more than halved to £177m.
Long-term chief commercial officer Trevor Strain also recently left the business and, as Retail Week first revealed, is in the frame to take up the vacant managing director job at Marks & Spencer.
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