Supermarket Giants Sell £6.5bn of Property to Cut Buyout Debt

The private equity owners of UK supermarkets Asda and Morrisons have raised £6.5 billion by selling store properties. This money is being used to reduce massive debts from their original purchases. Both chains were acquired using leveraged buyouts. This is a deal where a company is bought mostly with borrowed money. The new owners then used the supermarkets' own property assets to help pay down that debt. Asda's owners, the Issa brothers and TDR Capital, sold a majority stake in its property portfolio. Morrisons' owner, Clayton, Dubilier & Rice, sold several distribution warehouses and petrol forecourts. The sales involve stores operating under sale-and-leaseback agreements. This means the supermarkets sold the buildings but continue to rent them to run their stores. The strategy provides immediate cash to reduce high-interest debts from the acquisitions. However, it commits the supermarkets to long-term rental costs. Industry analysts note this shifts property ownership risks to new landlords while securing the supermarkets' tenancy.