Morrisons’ bond deal offers shareholders hope – analyst

By Rod Addy

- Last updated on GMT

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Morrisons announced a fresh wave of price cuts on June 23
Morrisons announced a fresh wave of price cuts on June 23
Morrisons’ ability to raise £300M through a favourable bond deal on Friday (June 27) was “a chink of light” for shareholders, according to Shore Capital analyst Clive Black.

The achievement would give shareholders renewed confidence in the troubled retailer, which earlier this month announced plans to axe 2,600 management personnel and announced annual losses of £176M in March, he said.

Black, Shore Capital director and head of research, said: “That Morrisons has been successful in raising these funds at a relatively attractive coupon to our minds … may provide a degree of confidence and support for shareholders in a group that has suffered heavy sales and margin attrition in recent times.”

‘Kicking and screaming’

However, he cautioned that Morrisons could be hit further if Tesco submitted to being “dragged kicking and screaming into the value dog fight in Britain”.

“Any such Tesco action would have to be absorbed by the market, albeit the market leader’s shares have much more downside to our minds than is the case for Morrisons.”

That said, Black said: The successful bond issue may be a chink of light in what has been a dark canister for shareholders in recent times.”

The retailer’s interim results, due to be announced in September, would reveal more about its situation, he said.

‘Reduce reliance on bank funding’

In a statement, Morrisons said: “The proceeds of the bonds will be used for general corporate purposes and will extend the average maturity of the company’s remaining debt, reduce its reliance on bank financing and diversify and strengthen its overall funding structure.”

Morrisons has taken several hits in the past six months, most recently facing criticism from former chairman Ken Morrison​ and former property director Roger Owen​ about current boss Dalton Philips’ strategic direction.

Under pressure from discounters Aldi and Lidl, Morrisons announced a further round of permanent price cuts exactly a week ago​. From June 23, the price of 135 products would fall by an average of 14%, it said.

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