Morrisons, Asda Face High Cost of Their Debt-Fueled Buyouts (1)

When the UK supermarket chains Asda and Morrisons were taken over last year, their private equity buyers took the typical step of piling them with debt. Now, that burden is becoming increasingly heavy as soaring inflation squeezes incomes, shoppers tighten their belts and borrowing costs soar.

The UK’s third and fifth-largest supermarkets are facing combined annual interest bills of more than £700 million ($805 million), according to analysts at Moody’s Investors Service. Covering those debt costs is a tough task in the UK, where intense competition among the big chains reduces their ability to raise prices.

Instead, grocers are having ...