Save A Lot Nets $350M in Recapitalization

Save A Lot has received a jolt of new capital, just in time to meet a market that may be turning its way again.

The St. Louis-based discounter has closed a refinancing that will eliminate some $500 million in debt and provide $350 million in new equity as a result of debt-for-debt and debt-for-equity swaps with its lenders. Those figures are considerably higher than when the agreement was announced in January, representing additional support from both new and existing lenders, sources said. When first announced, Save A Lot was anticipating new equity of $138 million and $400 million in reduced debts, based on support from holders of about two-thirds of its debts.

“With the completion of this recapitalization, we are moving forward with a substantially stronger financial foundation as we continue serving our customers and executing our transformation plan,” Kenneth McGrath, CEO of Save A Lot, said in a statement. “Our ability to achieve this outcome through a fully consensual and out-of-court agreement is a significant achievement and reflects the confidence of our new owners and lenders in our business model and long-term growth prospects. We thank our vendors and retail partners for their trust and support throughout this process, and we look forward to continuing to work closely with them into the future.”

Sources say Save A Lot’s transition plan includes exiting its corporate stores so as to act primarily as a wholesaler and licensee to independently owned stores. Those units—which have experienced a few years of rough performance as Save A Lot absorbed competitive hits from investments by companies such as Lidl and Walmart—could be looking at more favorable conditions for the discount space, given nationwide financial impacts of the coronavirus crisis.

McGrath gave a nod to employees and licensees as they adapted to new demands in the early weeks of the crisis.

“As our nation is impacted by the COVID-19 pandemic, I cannot say enough about the strength and resilience of our retail partners and our team members. These incredible people are on the front lines every day, and we thank them for their unwavering dedication to serving our customers and helping our communities manage through this unprecedented situation,” he said. “We understand the critical role our company plays as our communities rely on us now more than ever to provide food and other essential, high-quality products at low prices.”

PJ Solomon served as financial adviser to Save A Lot. FTI Consulting served as restructuring adviser, and Latham & Watkins LLP served as legal counsel. Halsey Lane Holdings LLC served as an adviser to the Save A Lot board of directors. Alix Partners served as restructuring adviser to Save A Lot’s term loan lenders, and Davis Polk & Wardwell LLP served as legal counsel.