SuperValu refinances debt, ends fiscal 2014 Q1 with $76 million cash

By Lisa Kerner

Charlotte, N.C., July 18 - SuperValu Inc. ended its first fiscal quarter of 2014 on June 15 with cash of $76 million, compared to $151 million at the end of the same period last year.

Chief financial officer Sherry Smith outlined the company's debt during an earnings call on Thursday.

SuperValu's outstanding debt at quarter-end included a $1.5 billion term loan, an asset-based revolving credit facility with a borrowing base that should range from $900 million to $1 billion; $628 million of senior notes due May 2016; $400 million notes maturing in June 2021; capital leases of $320 million; and $30 million of industrial revenue bonds, Smith said.

The company has $70 million of debt maturities coming due through 2016, not including capital leases.

"In late May, we completed certain refinancings that reduced the overall interest costs to the company and extends the maturity of $400 million of our bonds, which were previously due in 2016, to 2021," said Smith.

"First, we repriced and amended our existing $1.5 billion secured term loan, reducing our all-in costs by 125 basis points - a 100 bps reduction in our spread and a 25 bps reduction in the Libor floor."

SuperValu also modified the accordion feature, which increased the incremental loan amount available to $500 million.

"Next, we tendered the $372 million of our 8% 2016 notes, which helps mitigate any potential near-term refinancing risk," Smith added. "With this, we now have approximately $628 million of the May 2016s outstanding."

The tender offer was funded with $400 million of new eight-year unsecured bonds that bear interest at 6.75%.

According to Smith, as a result of the transactions, S&P upgraded SuperValu's rating to B+ from B. S&P and Moody's both upgraded their outlooks to stable, from negative.

Financial highlights

Net cash flows used in operating activities for the period were $103 million, compared to $11 million in the prior year. The increase reflects higher levels of working capital in the current year.

For the first quarter, net cash flows used in investing activities were $14 million compared to $94 million the prior year, reflecting lower levels of capital expenditures, according to the company's earnings news release.

First-quarter net sales were down 1.5% at $5.16 billion.

Gross profit margin for the first quarter was $712 million, or 13.8% of net sales, versus $707 million, or 13.5% of net sales last year.

Net interest expense for the first quarter was $249 million, which included $169 million in charges and costs related to current and previous financing activities.

In March, the company completed the sale of five retail banners to AB Acquisition LLC, an affiliate of a Cerberus Capital Management L.P.-led investor consortium, in a stock deal valued at $3.3 billion, including $100 million in cash and $3.2 billion in debt assumption.

SuperValu is an Eden Prairie, Minn.-based food wholesaler.

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