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SUPERVALU Inc. Message Board

  • jkwelli jkwelli Feb 13, 2012 11:50 AM Flag

    SVU debt

    Looks like they are reducing debt to me.


    From seeking Alpha Jan 2012 transcript:

    Moving to the balance sheet. We have reduced total outstanding debt by approximately $350 million year-to-date through last week and expect to meet our debt reduction target of $525 million to $550 million for fiscal '12. We continue to apply the excess cash flow from the holiday selling season to retire the term B-1 loan which matures in June 2012. To date, we have already prepaid over half of this nearly $250 million loan, and remaining F ’13 maturities now total roughly $480 million.

    Over the next 2 fiscal years, we have approximately $750 million in maturities and plan to retire this debt with internally generated cash flow. We remain in compliance with both credit facility covenants, with trailing 12 months EBIT of $1 billion, excluding impairment and other one-time items.
    ...
    As I have said before, SUPERVALU's free cash flow continues to be solid. We allocate cash flow among investments in our businesses, reducing leverage, and to our shareholders through quarterly dividends. We will generate more than $1 billion in operating cash flow this year, which provides us ample flexibility to meet our obligations, reduce our leverage and lower interest costs. We have managed our capital resources well, and I feel good with our liquidity and the pace of our debt payment.



    From seeking Alpha Jan 2011 transcript:

    Moving to our balance sheet, we have reduced total outstanding debt on a fiscal year-top-date basis through last week by nearly 700 million. We continue to manage working capital well with both retail and supply chain taking out about one day’s worth of inventory this year. We will retire the remaining 392 million of Albertson’s 7.5% bonds, which mature in February, and we expect to end fiscal ’11 with less than 200 million drawn on our credit lines, which total 2.3 billion of available capacity.

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    • This is great news. Reason to buy the Albertson bonds that yield over 10%.Debt reduction $525-550 million for fiscal 12. "with less than 200 million drawn on our credit lines, which total 2.3 billion of available capacity. " over $2 billion cushion

    • You just pointed to a pet peeve of mine that I have been planning to write the BOD about.

      http://www.sec.gov/Archives/edgar/data/95521/000095012311037681/c62333exv12w1.htm

      Does the calculation above make any sense? Obviously, it does not relate to the debt covenant because if it did, they would be in violation. If it does not relate to the debt covenant why would you include it? At best it is a stupid schedule, at worst it is misleading. I've read the debt agreements and have a calculation somewhere but I do not think SVU is providing sufficient information to make the calculation.

      Going from memory it is:

      EBITDA + Interest Expense + Lease/Rent Expense Divided by Interest Expense + Lease/Rent Expense.

      Emphasis, I am going from memory and am a second rate analyst. I tried to back into the 2.69 they provided and while I came relatively close I didn't get there. I was able to make a reasonable guess at the cushion they have and there is some spread but there are plenty of events that could push them over the edge.

      Very worthwhile discussion. If you are familiar with the debt covenants I'd be interested in hearing what you think. In the meantime, write SVU and tell them to fix that statement in their 10-K as it makes them look stupid and I know they aren't stupid.

    • "but they could drop from a 2.6 and 2.25 fairly easily."

      Can you quantify what 'fairly easily' is?

      How much does there EBIT need to drop to go below 2.25?

      One component of this calculation, the interest expense, has been decreasing.

    • They will never make a verbal statement indicating concern over the covenants. You have to go to the 10-K to see those. Even there the disclosures are not everything I'd like to see but they are better than most companies.

      Your focus should be on the fixed-covenant charges. As I said, I have no idea how hard they have had to push to keep above the 2.25 but they could drop from a 2.6 and 2.25 fairly easily. I'm sure that is why people are shorting the shares but as I've indicated, I'm long so don't take me as a "basher."

    • "I do not know how hard they have had to push in order to get the cuts and it is possible they are on the verge of a blow-up as we speak. I don't think they are and that they can manage through it but I do not work for the company or even in the grocery business."

      Well reading the transcript from 2 weeks ago gives no indication that they are on the verge of a blow-up.


      From seeking alpha transcript:
      Over the next 2 fiscal years, we have approximately $750 million in maturities and plan to retire this debt with internally generated cash flow. We remain in compliance with both credit facility covenants, with trailing 12 months EBIT of $1 billion, excluding impairment and other one-time items. Depreciation and amortization were $0.9 billion, and rent expense was $0.3 billion over this period.

      Looking forward to the end of F ’12, we would expect the leverage covenant as defined in our credit facility to be 3.4x, with a covenant maximum of 4.0x and the fixed charge coverage covenant to be approximately 2.6x, with a covenant minimum of 2.25x. The credit facility covenants I just spoke to reflect the tightened levels that were effective at the end of the calendar year.

    • Yes I do remember those things. SVU, on the other hand, is likely one of the most ethical companies out there. Make lots of mistakes but intentionally misleading investors is not one of them.

    • From seekingalpha.com SVU conference call.


      As a result of our analysis, we recorded a third quarter after-tax charge of $800 million. Let me assure you that this non-cash impairment charge does not impact any of our financial covenants, our ability to access our credit facility or any of our business strategies.

      Over the next 2 fiscal years, we have approximately $750 million in maturities and plan to retire this debt with internally generated cash flow. We remain in compliance with both credit facility covenants, with trailing 12 months EBIT of $1 billion, excluding impairment and other one-time items. Depreciation and amortization were $0.9 billion, and rent expense was $0.3 billion over this period.
      Looking forward to the end of F ’12, we would expect the leverage covenant as defined in our credit facility to be 3.4x, with a covenant maximum of 4.0x and the fixed charge coverage covenant to be approximately 2.6x, with a covenant minimum of 2.25x. The credit facility covenants I just spoke to reflect the tightened levels that were effective at the end of the calendar year.

    • Reduce debt by a little, reduce sales by a lot. Good plan.

      Seriously, they really ought to consider accessing the bond market and get rid of those scary debt debt covenants that could trigger a bankruptcy filing. Would increase interest expense but unless there is a lot more "operational cushion" than what appears to be there the risks are just extremely high.

      Would elimination of the dividend trigger a big sell-off? Would be nice to take bankruptcy off the table for a few years and violation of the debt covenants would clearly be a disaster for the share price.

      Nice big junk bond offering. That is what I'd think about doing.

      • 2 Replies to cohsgrad
      • The debt you are concerned about cares what % rate? The bonds you want to float would carry what junk bond % rate? I assume you want to pay off the debt and float junk bonds,no? I personally think the co. is doing fine paying down the debt,selling off some under performing stores, adding sav-a-lot stores,updating some stores and continuing the dividend.Thanks

      • All I know, coh, is YOU should look at DECREASING your short position pretty soon.

        SVU is extremely "overshorted". 30+% of the float is now in shorts. The ratio is over 7 days. Yes, they've had issues. But their free cash flow is more than enough to take care of their debt issues. Sheeple shorts have "flocked" to SVU massively recently. You must understand the contrarian nature of this market.... and when you see such a massive one way call (short), you move in to the OTHER position... which certainly is the case here in SVU land, IMO.

        With the 7 puts expiring at the end of this week, and the ex-div date is 2/28, shorts are indeed in a large fookorious position here.

        All I can say is, Good Luck to the shorts. lololol

    • Thank you for the good info. GLTU

    • Yeah I saw that too, looks good

 
SVU
9.43-0.06(-0.63%)Dec 19 4:02 PMEST

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