S&P rates Morrisons loans B+, notes CCC+

S&P said it lowered its senior secured ratings on Market Holdco 3 Ltd., the parent company of Morrisons, to B+ from BB- and its senior unsecured ratings to CCC+ from B-. Additionally, S&P trimmed the issuer rating to B from B+.

The agency assigned preliminary ratings on April 27. At that time, the company planned to sell senior secured notes and the agency did not assign any loan ratings. The 2 recovery ratings (80%) on the senior secured debt and 6 recovery ratings (0%) on the unsecured notes are unchanged. The loans were issued through Market Bidco Finco plc and the unsecured notes were via Market Parent Finco plc.

“Morrisons reported weak results for the nine months ending July 31, 2022, with the group's like-for-like sales (excluding fuel) down by 4.9%. While not directly comparable to our previous forecast because of the change in the accounting year-end, we estimate the group's S&P Global Ratings-adjusted EBITDA for the same period at £590 million, which is about 10%-15% lower than our previous fiscal 2023 expectation. In addition, we expect the upcoming quarters to be particularly tough in the U.K., with inflation set to rise to 12% over the winter despite the government's inflation-curbing energy price guarantee,” S&P said in a press release.

“In our view, despite management's efficiency and cost-optimization plans, it will be challenging for the group to materially improve its earnings over the next 18 months; we now forecast the group's leverage to be about 8.9x (7.3x excluding prefs) for fiscal year 2023, which is outside the threshold for a B+ rating,” the agency added.

The outlook is stable.

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