Morrisons’ private equity owners have sought to soothe fears that pledges designed to honour the legacy of its founding family are in jeopardy from a mounting interest bill.

Spiralling inflation and rising interest rates mean bridging loans that need to be refinanced will cost more than previously thought, adding to pressure on the supermarket’s stretched balance sheet.

The spectre of a soaring interest bill risks leaving Clayton, Dubilier & Rice (CD&R), which won a £10bn battle for Morrisons in October, with little choice but to cut costs in order to balance the books once its takeover completes.

But CD&R this weekend sought to head off concerns, A spokesman for the US-headquartered investment firm said: “CD&R values Morrisons’ distinctive business model and is committed to supporting it.”

The unusual intervention follows fears that were raised when a bidding war erupted for Morrisons last year that the late Sir Ken Morrison’s thrifty approach, his dislike of debt, and commitment to British farming could be under threat.

Morrisons is British farming’s biggest single customer and works directly with more than 3,000 livestock farmers and 200 growers. Last month rival Asda ditched a promise to sell 100pc British beef because of higher prices.

Prior to agreeing the deal, CD&R said that it “recognises the importance of the integrated model and will support Morrisons to invest in its supply chain and nurture the relationships with its supplier network”.Sir Ken, son of William Morrison, the supermarket’s founder, prided himself on funding the rollout of new stores from profit rather than debt.

Private equity would typically look to sell off freehold property in order to boost returns, but CD&R has previously said it did not intend to offload a “material” number of Morrisons freeholds as part of a string of non-binding pledges made as part of the takeover deal. It also said it would review the chain’s nearly 500 stores, as well as its manufacturing and packing sites.

Meanwhile, CD&R, whose bid was led by Sir Terry Leahy and made alongside a clutch of American hedge funds, said it would review Morrisons’ estate of 339 petrol stations. They could be combined with MFG, with another business owned by CD&R, though this would likely raise competition concerns.

Lenders that provided higher ranking loans are increasingly nervous that they will have to offload their debts at a discount. CD&R delayed plans to raise £6.6bn of debt in December to repay banks that funded its takeover bid, with fears over uncertainty surrounding the omicron variant blamed at the time.

One lender said that they would  “sit on their exposure” for now in the hope that market conditions would improve. However, banks holding some of Morrisons higher quality loans are now bracing to sell their debt at a small discount that could wipe out fees and interest, the person added.

Last week, lenders holding £1.2bn Morrisons riskiest debts were forced to sell them at 20pc discount to the Canada Pension Plan Investment Board, which one senior lender sent “a chill down some people’s back”. Morrisons will pay interest at a rate of 6.5pc.

In total, lenders were paid £249m in interest and fees for financing the CD&R takeover.

Althea Spinozzi, senior fixed income strategist at Saxo Bank said that corporate bond interest rates for better quality debts have been increasing since the start of the year.

She said: “It is not surprising investors are more selective in picking debt amid a high inflationary and rising interest rate environment.” 

City sources said that the debt markets had also been spooked by reports that Morrisons chief executive David Potts was looking to step down in around two years’ time and that the supermarket had hired headhunters from Skill Capital. Sources close to Morrisons and CD&R insist that Mr Potts will not step down in the next couple of years.