I currently do not see SVU as being close to bankruptcy IMO. Since we have some grocery chains that have gone belly up, let’s review some of the differences.
Winn-Dixie went bankrupt in February, 2005. They saw significant erosion of their revenue due to image issues and competition. From 2003 to 2005, they saw the gross profit decline by over 20%, saw profit margins go negative and cash flow from operations went negative. Over this two year period of time, they added an additional $200M in debt as they tried to right the ship before filing Chapter 11.
Great A&P just went bankrupt recently and once again you have a case where their cash flow from operations went negative and they were borrowing money and adding to debt trying to stay out of Chapter 11. If I am not mistaken, this is GAP’s third visit before the judge over it history. (Why they are still around is beyond me.)
SVU is currently seeing some issues which they are trying to resolve themselves by closing underperforming stores, taking the charges for the closures and then writing down goodwill as their share price has declined. But they continue to generate strong positive operating cash flow and have decent profit margins (although they could be better). More importantly they continue to aggressively pay down their debt. Although they have considerable obligations due between now and 2016, if they maintain their cash flow, meeting the debt obligations should not be an issue.
I see SVU as a good value at its current level and have recently become a buyer.
Even if SVU did file, it is unlikely IMO that the bondholders would come out remotely close to even, given the huge amount of bonds outstanding. This is especially true given that the bond prices are still trading fairly close to par, for the most part.
Look at GM. Even after a great turnaround and sucessful stock offering in Nov., the bond holders are still getting only 35 cents on the dollar at this point. Hardly a windfall!
Paid down $3 BILLION dollars in debt since February of 2008, in spite of being in difficult economic times. Stock will hit $60 in 5 years as debt continues to liquidate. Long term hold and MM's are manipulating right now.
In the WINN bankruptcy a few years ago the bond holders got much of the equity, then they sold the equity at much higher value than the debt face value. I suppose it could happen here too but I don't think bankruptcy is imminent.