-- 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
-- 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.
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.
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.
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
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 Affirmed; Recovery Ratings Unchanged; CreditWatch Action
Corporate Credit Rating B/Watch Pos/-- B/Negative/--
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
Senior Unsecured B-
Recovery Rating 5
American Stores Co.
Senior Unsecured B-
Recovery Rating 5