The credit rating agency has warned that Morrisons is struggling with the burden of debt from private capital takeovers.
The supermarket was assigned to Fitch a “speculative” debt rating, indicating “increased vulnerability to default risk.”
The agency warns that Morrison’s rating would have been even lower had it not been for the strong management team and the grocer’s profitability.
Debt fears: Morrisons received “speculative” debt rating from Fitch, indicating “increased vulnerability to default risk”
This warning was echoed by rival rating agency Moody’s, which downgraded Morrison’s credit rating.
In October, Morrisons was transferred to New York private capital Clayton, Dubilier & Rice for 7 billion pounds. The deal has cost him a debt of £ 5.6 billion, which he will have to service, leading to fears that he will not be able to keep prices low.
Fitch’s rating will be another blow as a low credit rating makes companies more expensive to refinance and borrow.
Morrisons and Asda, which also recently fell into the hands of private equity as a result of the takeover, are lagging behind competitors since the deals were struck.
Figures from the Kantar marketing research group show that they are losing market share, which raises fears that private equity barons will not become good stewards.
They were accused of raising prices more than competitors, and they saw sales fall more than other grocers.
Fitch analyst Sophie Kuto said: “We believe the business is reliable, the stores are well developed and invested.
“But to make up for that, the leverage is very high for the rating … even incompatible with the rating.”
The credit rating agency has warned that Morrisons is struggling with the burden of debt from private capital takeovers.
The supermarket was assigned to Fitch a “speculative” debt rating, indicating “increased vulnerability to default risk.”
The agency warns that Morrison’s rating would have been even lower had it not been for the strong management team and the grocer’s profitability.
Debt fears: Morrisons received “speculative” debt rating from Fitch, indicating “increased vulnerability to default risk”
This warning was echoed by rival rating agency Moody’s, which downgraded Morrison’s credit rating.
In October, Morrisons was transferred to New York private capital Clayton, Dubilier & Rice for 7 billion pounds. The deal has cost him a debt of £ 5.6 billion, which he will have to service, leading to fears that he will not be able to keep prices low.
Fitch’s rating will be another blow as a low credit rating makes companies more expensive to refinance and borrow.
Morrisons and Asda, which also recently fell into the hands of private equity as a result of the takeover, are lagging behind competitors since the deals were struck.
Figures from the Kantar marketing research group show that they are losing market share, which raises fears that private equity barons will not become good stewards.
They were accused of raising prices more than competitors, and they saw sales fall more than other grocers.
Fitch analyst Sophie Kuto said: “We believe the business is reliable, the stores are well developed and invested.
“But to make up for that, the leverage is very high for the rating … even incompatible with the rating.”
