TEXT - S&P may SUPERVALU ratings

Mon Jan 14, 2013 11:22am EST

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Overview
     -- U.S. supermarket operator SUPVERVALU Inc. announced that it has 
reached a definitive agreement to sell a significant portion of its food 
retailing assets to AB Acquisition LLC, an investor consortium led by an 
affiliate of a Cerburus Capital Management L.P. in a transaction valued at 
$3.3 billion.
     -- We are placing our ratings on SUPERVALU, including the 'B' corporate 
credit rating, on CreditWatch with positive implications.
     -- Our ratings on the exiting Albertson's and American Stores issue-level 
debt are affirmed and not placed on CreditWatch. We could reassess these 
ratings when more details about the acquiring entity become available.
     -- The CreditWatch positive listing indicates that we could raise the 
ratings based on the potential for a modest reduction in debt leverage and 
improvement in profitability following the transaction.

Rating Action
On Jan. 14, 2013, Standard & Poor's Ratings Services placed its ratings on 
SUPERVALU Inc., including the 'B' corporate credit rating, on CreditWatch with 
positive implications following the announcement that SUPERVALU has reached a 
definitive agreement to sell 877 stores under five banners (its Albertson's, 
Acme, Jewel-Osco, Shaw's, and Star Market stores) to AB Acquisition.

AB Acquisition will acquire the stock of New Albertson's Inc. (NAI), a wholly 
owned subsidiary of SUPERVALU, for $100 million in cash and absorb about $3.2 
billion of NAI debt in a transaction valued at $3.3 billion. Concurrently, an 
entity owned by a Cerburus-led investor consortium will conduct a tender offer 
for up to 30% of SUPERVALU's shares at a price of $4.00 per share.

Rationale
The CreditWatch listing reflects our opinion that the sale transaction, if 
completed as proposed, will result in a modest decline in debt leverage for 
SUPERVALU, with total debt to EBITDA possibly below 5.0x on a pro forma basis 
from our expectations of 5.3x in fiscal 2013. The transaction will not only 
lessen SUPERVALU's balance sheet debt, but also could substantially lower its 
operating lease commitments and multiemployer plan liabilities. Following the 
sale of its retail assets, SUPERVALU will generate about half of its revenue 
from its food wholesaling operations and the remainder from Save-A Lot and a 
number of regional grocery banners: Cub, Farm Fresh, Shoppers, Shop n' Save, 
and Hornbacher's. Although SUPERVALU is selling a large portion of its 
struggling retail assets, the remaining retail assets still face significant 
competitive pressure. However, we believe the food wholesale business is 
relatively more stable andSUPERVALU maintains a strong position as the 
second-largest food wholesaler in the U.S. after C&S Wholesale. We also 
believe that SUPERVALU could achieve a slight improvement in profitability 
given that it is divesting part of its underperforming retail operations and 
that the repositioned company will be less capital intensive going forward.

In connection with the asset sale transaction, SUPERVALU has negotiated a new 
and fully underwritten $900 million asset based revolving credit facility and 
a $1.5 billion secured term loan.

CreditWatch
Standard Poor's uses CreditWatch when it believes that the likelihood of a 
rating action within the next 90 days is substantial and there is at least a 
one-in-two likelihood of a rating change.

We aim to resolve the CreditWatch in the near term based on a review of 
SUPERVALU's business and financial risk profiles following the sale of the 
retail assets and the pro-forma capital structure following the asset sale 
transaction.

Related Criteria And Research
     -- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
     -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
     -- Credit FAQ: Knowing The Investors In A Company's Debt And Equity, 
April 4, 2006

Ratings List

Ratings Affirmed; Recovery Ratings Unchanged; CreditWatch Action
                                        To                 From
SUPERVALU Inc.
 Corporate Credit Rating                B/Watch Pos/--     B/Negative/--

SUPERVALU Inc.
 Senior Secured                         BB-/Watch Pos      BB-
   Recovery Rating                      1                  1
 Senior Unsecured                       B-/Watch Pos       B-
   Recovery Rating                      5                  5

Ratings Affirmed; Recovery Ratings Unchanged

Albertson's Inc.
 Senior Unsecured                       B-
   Recovery Rating                      5

American Stores Co.
 Senior Unsecured                       B-
   Recovery Rating                      5
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