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Albertsons Debt Falls on Latest EBITDA Slump, Management Reshuffle

Debt backing Albertsons was falling today, after the Cerberus-controlled food and drug retailer again booked sharply lower quarterly earnings, with adjusted EBITDA of $429 million for the issuer’s fiscal third quarter, ending Dec. 2, down from $674.8 million for the same period last year.

Meanwhile, net sales of $13.6 billion “remained flat” over the period, according to a filing today, with $117.6 million and $95 million respective increases from fuel sales and sales from new stores and acquisitions, net of store closings, offset by a $225.3 million decline in same-store sales.

The retailer today also announced that Wayne Denningham, its president and chief operating officer, plans to retire by the end of the fiscal year, and that Albertsons has named Susan Morris as the company’s executive vice president and COO, to oversee the company’s supply chain, manufacturing, and operations functions.

Albertsons 5.75% notes due 2025 and 6.625% notes due 2024 were down three points and 2.75 points, respectively, in midday trading, falling to 87.5 and 93.25, according to MarketAxess. Meanwhile, Albertsons’ B-4 term loan (L+275, 0.75% LIBOR floor) was at a 97.5/98.5 market today, down more than a point from before the news, sources said, while the issuer’s B-5 term loan (L+300, 0.75% floor) was quoted at 97/98, a 1.5-point dip from the last session.

“We are very encouraged now that our identical store sales trends have turned positive in the fourth quarter of fiscal 2017, as our marketing and merchandising plans are taking hold, and prior year comparisons ease,” CEO Bob Miller said in a Tuesday statement. He noted that the company expects improvements to adjusted EBITDA in fiscal 2018, “as a result of $100 million in expected additional synergies from the Safeway acquisition as the SuperValu transition services agreement winds down, as well as from the implementation of $150 million of identified cost reduction initiatives.”

The company now forecasts fiscal 2018 EBITDA of roughly $2.7 billion, with expected capital expenditures for the period falling to $1.2 billion, indicating a decline of $300 million from the previous period.

Albertsons debt previously declined in October, after the food and drug retailer reported adjusted EBITDA of $485.2 million for the quarter ended Sept. 9, down from $573.7 million year-over-year, while net sales and other revenues of $13.83 billion dipped mildly over the period, from $13.86 billion.

As of Dec. 2, the issuer had no borrowings outstanding under its $4 billion ABL facility, and a total availability of roughly $3 billion net of letters of credit usage.

The food and drug retailer in May repriced all three term loans. Of note, Albertsons on Sept. 25 inked a sale-leaseback deal for 71 of its store properties for an aggregate purchase price of $705 million, net of closing costs. “After giving effect to the sale-leaseback transaction, the company owns or ground leases approximately 43% of its stores with an appraised value of $11.5 billion,” the company noted in its filing.

Albertsons is a Boise, Idaho–based U.S. food and drug retailer, controlled by Cerberus Capital Management, operating 2,323 retail food and drug stores as of Dec. 2. — James Passeri/Kelsey Butler

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