Albertsons Buys Disputed Safeway Bonds

Albertsons Cos. said its Safeway subsidiary has bought back $332 million of Safeway bonds that were in dispute with holders over a default claim.

In a filing, the Boise, Idaho-based retailer said it used cash to buy back $23 million in 7.45% notes due in 2027 and another $309 million in 7.25% notes due in 2031. Safeway funded the purchase using cash on hand and borrowings under an asset-backed credit facility.

The bonds were bought at par value, plus accrued and unpaid interest.

Earlier this year, a law firm purporting to represent holders of more than 45% of the 2031 notes petitioned the trustee overseeing the bonds to declare Safeway in default, arguing that asset-backed loans taken by Albertsons violated a covenant in the indenture for Safeway’s bondholders that prohibited Safeway from incurring liens on its assets that did not secure those holders.

Albertsons, which acquired Safeway in 2015, disputed the opinion of the bondholders and on Nov. 9 filed a lawsuit seeking among other things a declaratory judgement that it was not in default. Albertsons in its most recent filing said it dropped the suit Nov. 29.