Supervalu has renegotiated a $1.5 billion term loan agreement — another necessary step if the grocery retailer spins off discount chain Save-A-Lot.
Supervalu takes another step in possible Save-A-Lot spin-off
The Eden Prairie-based grocery retailer has renegotiated its loan agreement.
May 24, 2016 at 1:12AM
The Eden Prairie-based Supervalu announced Monday that it completed the amendment of its loan agreement, which will allow the company to undertake transactions necessary for Save-A-Lot to become a separate company.
"The company now has the flexibility under its credit agreements to further explore the previously announced potential separation of Save-A-Lot into a stand-alone, publicly traded company," said Bruce Besanko, Supervalu's chief operating and financial officer, in a statement.
Supervalu last July said it was considering a spinoff of Save-A-Lot, which has been viewed as a prized segment for the company, which also owns Cub Foods. At the time, company executives said a separation of Save-A-Lot could allow for better management focus of Supervalu's business units. Last month, the company reported weak quarterly sales with sales at Save-A-Lot being flat.
If a spinoff does happen, the amendment requires Save-A-Lot to issue a minimum of $400 million of long-term debt and that Supervalu's term loan balance be reduced by a minimum of $350 million.
In addition, Supervalu would also have to retain a certain minimum equity stake in the new Save-A-Lot company. Last month, the company said that ownership will likely be from 19 percent to 40 percent, higher than the 20 percent maximum for which Supervalu had initially planned.
Future cash proceeds from sale of the retained equity could be required to be used to reduce the term loan balance.
The amendment also increases Supervalu's flexibility to execute certain sale and lease-back transactions and acquisitions. The maturity date of the term loan remains March 21, 2019.
Nicole Norfleet • 612-673-4495
Twitter: @nicolenorfleet
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