Clayton, Dubilier & Rice have postponed plans to raise £ 6.6bn in debt to raise funds for the acquisition of supermarket chain Wm Morrison. This is the UK’s largest private transaction for over a decade.
The US private equity group pioneered the market at the end of last month and planned a funding package that included one of the largest pound sterling sales ever. Agree to trade £ 10 billion Dominates the UK’s fourth largest supermarket chain in October.
Refinancing plans are now being reverted to 2022 as bond market investors are becoming more and more nervous about the potential impact of the Omicron variant of the coronavirus, people familiar with the matter say.
Prior to the delay first reported by Bloomberg, some investors had expressed concern about Morrisons’ debt.
CD & R declined to comment on this report.
The document states that CD & R will provide up to £ 6.6 billion in debt loans, including £ 2 billion term loans from banks, £ 1 billion revolving credit lines and £ 3.6 billion bonds. This is more than double the debt that the Group has incurred in recent years, even before it includes lease and annuity obligations, and more than six times the reported income before interest, taxes, depreciation and amortization.
Compared to profits, the billionaire Issa brothers and private equity fund TDR completed a £ 6.8 billion deal earlier this year, higher than the debt they incurred when they acquired Asda, the UK’s third-largest supermarket. It has become.
Morrisons’ funding was “too far” last month, a junk bond investor said, and June’s £ 6.6 billion debt before the bidding war pushed up stock prices was far from the company’s overall £ 7.6 billion corporate value. I pointed out that there is no such thing. This summer. He added that extra borrowing would leave little room for maneuvering in supermarkets if performance deteriorates.
“Morrisons need to offer higher yields because they are more leveraged than Asda .. They will not leave them with many wiggle rooms,” he said. “They may prefer to wait for the market to settle.”
CD & R announced in September that it would invest £ 3.4 billion in the £ 10 billion cost of buying a grocery store. this is, £ 780m investment Trading Asda by TDR and Issas.
However, that figure of £ 1.3 billion will be offered in the form of “preferred stock” by a credit fund operated by Goldman Sachs and Ares Management.
These pay an amount equivalent to an annual dividend of 11.5%. It can be rolled up instead of paying annually.
Morrisons funding is the latest in a series of high-yield bond issuance postponed after the emergence of a new variant of the coronavirus, which can make low-rated companies struggle to repay their debts. The risk of deceleration is increasing.
It followed the wider one Sale of junk bonds, US high yield bonds fell the most since September 2020 last month.
Credit market observers expected Morrisons packages to overtake Asda raises £ 2.75 billion Issued in February as the largest high yield bond in history in the UK.
Many analysts, like Asda, have Morrisons Sell assets To reduce that leverage. In a Morrison’s bid dispute, CD & R said it “does not intend to sell and leaseback materials in stores,” but disposes of stores and sells and leases assets elsewhere in real estate, including distribution. Be careful not to exclude the bag completely. And food production assets.
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