SUPERVALU Inc. (SVU) recently commenced the sale of a portion of senior notes worth $300 million due on May 1, 2016. The senior notes carry an interest rate of 8.00% and will be sold according to a modified “Dutch Auction” tender offer. The procedure is expected to close on May 30, 2013. As of May 2, 2013, the company had $1.0 billion aggregate principal amount of outstanding notes.
The senior note program will increase the company’s liquidity. Although SUPERVALU’s cash and cash equivalents as of Feb 23, 2013 were $72.0 million, down from $155.0 million as of Dec 1, 2012, its long-term debt and capital lease obligations fell drastically to $2.8 billion as of Feb 23, 2013 from $6.2 billion as of Dec 1, 2012.
SUPERVALU has been adversely affected by the slow economic recovery and low disposable income of U.S. consumers, which resulted in cautious spending in the quarter. The company streamlined some of its non-performing supermarkets in order to optimize resources and improve business.
On Mar 18, 2013, as a part of its broad-based strategic alternatives, SUPERVALU sold Albertson's, Jewel-Osco, Acme, Shaw's and Star Market chains, comprising a total of 877 stores, to equity firm Cerberus Capital Management LP, for $3.3 billion. The company intended to streamline its operations in order to focus on Save-A-Lot discount stores, as well as its smaller regional chains – Cub, Farm Fresh, Shoppers, Shop 'n Save and Hornbacher's.
SUPERVALU carries a Zacks Rank #3 (Hold).
Stocks in the sector that are performing well and deserve a mention include Haverty Furniture Companies Inc. (HVT), carrying a Zacks Rank #1 (Strong Buy) and Etablissements Delhaize Fr (DEG) and The Kroger Co. (KR) carrying a Zacks Rank #2 (Buy).
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