Save A Lot lands $350 million in new capital

As part of a broader refinancing, Save A Lot has secured $350 million in new capital to help fuel the discount grocer’s business transformation plan.

St. Louis-based Save A Lot, owned by Canadian private-equity firm Onex Corp., said Friday that it has completed debt-for-equity and debt-for-debt exchanges that cut about $500 million in debt and brought a $350 million capital infusion from new and existing lenders. Besides accelerating Save A Lot’s rebound strategy, the recapitalization and deleveraging also will buttress the retailer’s operations, the company noted.

“We are moving forward with a substantially stronger financial foundation as we continue serving our customers and executing our transformation plan,” Save A Lot CEO Kenneth McGrath 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.”

The unanimous agreement boosted the levels of new capital and debt reduction in a pending deal that Save A Lot announced in early January. Under that arrangement, the retailer would receive $138 million in new capital and lower debt by more than $400 million.

Related:Save A Lot to hire 1,000 workers to meet coronavirus-triggered demand

“We thank our vendors and retail partners for their trust and support throughout this process,” McGrath added, “and we look forward to continuing to work closely with them into the future.”

Also on Friday, McGrath applauded the performance of Save A Lot store associates and independent owner/operators during the coronavirus 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,” he stated. “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. 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.”

In March, Save A Lot announced a crash program to add 1,000 or more jobs in its stores and distribution centers nationwide, citing “unprecedented levels of business and demand” from the COVID-19 outbreak.

“Save A Lot is one of America’s great discount grocery brands. During this critical time, when customers will increasingly need access to high-quality food at affordable prices, Save A Lot is now meaningfully better-positioned from a financial perspective to continue to serve its communities,” Scott Moses, managing director and head of food retail and restaurant investment banking at PJ Solomon, said in an email Friday. New York-based PJ Solomon is serving as financial adviser for Save A Lot. “We are honored to have been able to help Kenneth McGrath and his exceptional team facilitate this important transformation.”

Related:Save A Lot’s Kevin Proctor: Discount grocery model has a lot to offer independents

Overall, Save A Lot operates 14 distribution centers and has a retail network of more than 1,125 stores in 33 states, with the vast majority of the locations licensed by independent grocers. On the 2020 Supermarket News Top 75 list of the largest grocery retailers and wholesalers, Save A Lot finished 43rd in sales at $3.66 billion for the 2019-20 fiscal period, down 9.9% from 2018-19. The retailer was No. 19 by store count, though its number of locations fell by 127 (-10.1%) versus a year earlier.

In a late February interview with SN at the National Grocers Association convention, Save A Lot Chief Operating Officer Kevin Proctor said the retailer differs from other discount grocery models — namely, Aldi and Lidl — through its stores’ localized assortments and local ownership. This enables independent grocers under the Save A Lot banner to cater their customers and communities while maintaining the benefits of a value grocery model: a heavy focus on private label, limited assortment, a low-cost operational model, and an easy-to-shop store layout.

“What Aldi and Lidl can’t do is they can’t differentiate on the shop floor to a local community,” Proctor told SN. “That’s an opportunity that every independent has — how do I localize my store on the assortment front? How do I localize my store to the community?”

Save A Lot stores run about 16,000 square feet and carry around 2,000 SKUs across more than 50 private brands, according to Proctor. Through an everyday low pricing (EDLP) strategy, the retailer offers savings of up to 40% over conventional supermarkets on private-label and national-brand products, USDA-inspected meat, farm-fresh produce and non-food items.“

“More than 90% of customers will shop a retailer because they trust the retailer. And I think that's the edge in our business,” Proctor said. “We say you need to compete on price, win on convenience and differentiate on localization.”