Morrisons has begun a process to cut its debt load, following the £2.5bn sale of its petrol forecourts to Motor Fuel Group (MFG) last month.

The deal gave Morrisons a 20% minority stake in MFG and established commercial and supply agreements with the fuel group.

At the time, the grocer said it intended to use the cash proceeds of £1.8bn to strengthen its structure and help to repay some of its mounting debt pile.

To reduce its debt, it has now started a process involving multiple tender offers to a number of debt investors. They have allocated up to £1bn for this, all funded from cash reserves.

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It comes as Morrisons fell to a £1bn loss in 2023 as debt interest payments linked to its private equity takeover soared.

In October 2021, private equity firm Clayton Dubilier & Rice (CD&R) won an auction to buy Morrisons in a deal valued at £7bn, and according to the retailer’s most recent financial report, it had £8.5bn in debt at the end of October last year.

Morrisons parent company Market Topco’s accounts showed that the group posted a pre-tax loss of £1.1bn last year, having accumulated £735m in interest costs which were tied to external debt and inter-company loans.

The debt-financing bill was 23% higher than the £593m incurred in 2022.

In February, Morrisons started to explore the potential sale of its bakery business in a bid to sell off assets to reduce its debt pile and hired advisers at Deloitte to search for a buyer for Rathbones bakery – a factory that supplies baked good to the grocer.

The news comes as Morrisons is being sued over the £2.5bn deal to sell its petrol forecourts, with a subsidiary of French conglomerate Bouygues alleging a breach of contract by the supermarket.

Shortly following its sale to MFG, Morrisons ditched an EV charging agreement it had made in 2019 with Bouygues-owned Equans EV Solutions, which granted the firm exclusive rights to install chargers at 273 of its forecourts.