Save A Lot completes refinancing of business

Save A Lot has capped off a business refinancing that began three years ago, during which time the company shifted from a retail to a wholesale model.

Parent company Moran Foods LLC said it closed on a debt restructuring, effective Dec. 30, that includes a new credit vehicle plus almost $400 million in loan and credit extensions. A new $200 million, five-year asset-based lending (ABL) credit facility, encompassing a $180 million traditional ABL and a $20 million FILO ABL facility, refinances a “more restrictive” $150 million ABL facility and an “expensive” $48 million FILO facility, the company said.

Moran also extended the maturities of about $250 million in first-lien term loans to June 30, 2026, and roughly $127 million in second-lien term loans to Dec. 31, 2026. The company noted that $22 million in existing second-lien term loans weren’t extended and are set to mature on Oct. 1, 2024. In addition, Moran extended $15 million in commitments under a super-senior credit facility to June 30, 2026.

The refinanced debt facilities were part of Save A Lot’s 2020 restructuring, which included debt-for-equity and debt-for-debt exchanges that cut about $500 million in debt and brought a capital infusion from new and existing lenders. At the time, Save A Lot said the recapitalization and deleveraging were aimed at buttressing the retailer’s operations and accelerating its rebound strategy. The recapitalization also led to the departure of Canadian private-equity firm Onex Corp. as Save A Lot’s owner.

In late December 2020, Save A Lot unveiled a plan to transition from a retailer to a wholesaler, in which the limited-assortment, discount grocery chain would sell more than 300 corporate-operated locations to current and new independent retailers licensed under its banner. That process came to a close in February 2022, when Save A Lot officially announced that its operation under a “pure-play wholesale model.” In its hometown St. Louis area, Save A Lot retained approximately 20 stores as a test market for new innovations and programs.

All Save A Lot stores are slated to be remodeled by 2024, led by upgrades designed to highlight shopper savings. / Photo courtesy of Save A Lot

“The financial stability brought on by our transformation into a branded wholesaler, focused on supporting our independent licensees, has allowed us to complete a refinancing of the business, putting in place a more traditional asset-based lending facility and extending the maturities of most of our existing term loans. The benefits of this include improved liquidity, increased operational flexibility and lower borrowing costs,” Save A Lot CEO Leon Bergmann said in a statement on Thursday.

Bergmann was announced as Save A Lot’s new CEO last February, about a week before the retailer reported the completion of its retail-to-wholesale transition. The addition of the longtime grocery wholesale executive came nearly four months after Save A Lot appointed Craig Herkert as interim chief executive upon the exit of CEO Kenneth McGrath.

Save A Lot struggled following its December 2016 acquisition by Onex for about $1.4 billion from Supervalu Inc. Now part of United Natural Foods Inc., Supervalu had previously explored a spinoff or sale of Save A Lot but encountered difficulty as grocery economic conditions and the chain’s performance waned. Competition also surged in the U.S. value grocery arena, especially with the aggressive expansion of Aldi and, more recently, Lidl and Grocery Outlet. Former Lidl executive McGrath was named Save A Lot CEO in April 2017 to lead a turnaround of the business, taking over from Eric Claus, who in 2016 had begun efforts to upgrade the retailer’s stores.

When the wholesale business transition was announced, Save A Lot operated 14 distribution centers and had a retail network of more than 1,000 stores in 33 states, with the vast majority of the locations licensed by over 200 independent grocers. The company now has 13 distribution centers and serves about 850 stores in 32 states.

According to Bergmann, the refinancing better positions St. Ann, Missouri-based Save A Lot to focus on growth initiatives.

“We believe this will translate into a greater opportunity for us to both invest in growth, through our licensed retail store model, and, coupled with our on-going sale of excess real estate, provide a path to potential meaningful debt reduction that will further strengthen our balance sheet and accelerate growth,” he stated. “We want to thank our existing lenders, most of whom are also our shareholders, and the other financial institutions that supported us in the completion of this important initiative.”

Under a plan announced in July 2021, all Save A Lot stores are slated to be remodeled by 2024. Upgrades have included an enhanced shopping environment and selection, a new decor package and store layout, and conversion to Save A Lot’s latest branding. The company, too, launched a brand refresh led by an updated logo and private-label packaging plus a marketing campaign highlighting the value that shoppers find in its stores. Save A Lot locations run about 16,000 square feet and carry around 2,000 SKUs. Through an everyday-low-pricing strategy, the retailer offers savings of up to 40% over conventional supermarkets on private- and national-brand products, USDA-inspected meat, farm-fresh produce and nonfood items.