22 October 2018 by lberuti
Back in July, SVU (Supervalu Inc.) agreed to be sold to another food wholesaler, United Natural Foods Inc, in a $2.9Bln deal, after it spent the last decade trying to overcome the downturn’s effect on the huge bet it made when it bought more 1,100 stores from Albertsons in 2006 for $12Bln. This summer’s deal sent the risk premium of CDS referencing SVU tumbling tighter as investors expected it to become an empty shell from a debt point of view. Last week the deal was approved, and SVU’s risk premium hardly reacted. United Natural Foods is currently trying to lure investors to a nearly $2Bln loan backing its buyout of SVU. It had to revise the terms with investor-friendly changes compared with what was originally whispered after the release of deteriorating earnings by both retailers, and SVU’s risk premium hardly reacted. What really got it going was the mention in the final documentation of the loan published today that SVU would be a co-borrower. All of a sudden it was no longer a dead box. While its 5-year CDS was trading at 190bps on the 18th of October, it closed double that tonight at 379bps.