Supervalu Sets Rate on $2.4 Billion Loan for Cerberus Sale

Supervalu Inc., the third-largest U.S. grocery chain, set the rate it will pay on $2.4 billion of loans to support the sale of five supermarket chains to a Cerberus Capital Management LP-led investor group.

A six-year, $1.5 billion term loan, that won’t have financial-maintenance covenants, will pay interest at 5.75 percentage points more than the London interbank offered rate with a 1.25 percent minimum, said a person with knowledge of the matter. Supervalu, based in Eden Prairie, Minnesota, may sell the debt at 98.5 cents on the dollar, said the person, who asked not to be identified because terms are private.

Lenders to the term portion are offered one year of 101 soft-call protection, the person said, meaning that Supervalu will have to pay one-cent more than face value to reprice the debt in its first year.

Reuters Plc reported pricing on the term loan earlier today.

The financing also includes a $900 million asset-based revolving line of credit that will begin paying interest at 2 percentage points more than Libor, according to a regulatory filing yesterday.

Goldman Sachs Group Inc., Credit Suisse AG, Morgan Stanley, Bank of America Corp. and Barclays Plc are arranging the term piece, and lenders must let the banks know by the week of Feb. 11 whether they will participate in the deal, according to the company. Wells Fargo & Co. provided the asset-based revolver.

Proceeds from the debt will be used to replace a $1.65 billion asset-backed credit line, an $846 million term portion and to refinance $490 million of 7.5 percent notes that come due in November 2014, according to a Jan. 10 statement.

Albertsons, Acme

Supervalu is selling its Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market stores and related pharmacies to AB Acquisition LLC, an affiliate of a Cerberus-led investor group, in a transaction valued at $3.3 billion, according to the statement.

Mike Siemienas, a spokesman for Supervalu, said the company declined to comment beyond what’s been made public in the Jan. 10 statement or earnings call.

Kroger Co., based in Cincinnati, is the largest U.S. grocer and Pleasanton, California-based Safeway Inc. is the second-biggest.

In a revolving line of credit, money may be borrowed again once it’s repaid; in a term loan it can’t. An asset-backed loan is secured by a company’s receivables and inventory.