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Strategies & Market Trends : Value Investing

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To: E_K_S who wrote (40477)	12/12/2010 2:40:05 PM
From: E_K_S	Read Replies (2) of 78480

Re: SUPERVALU Inc. (SVU) - Outstanding Debt analysis The site below provides a listing of all the outstanding debit for SVU. There are 27 issues that have maturities that range from 2011 through 2031. I was surprised to see the total debt outstanding was now at $4.625 Billion. Yahoo Finance lists the debt at 7.45B which may also include other revolving line(s) of credit. They do not have any preferred shares outstanding as this was called in 2006. cxa.marketwatch.com. The coupon amounts on their outstanding bonds range from 6.1%-8.7% with the average rate at 7.0%. The maturities come due over these segmented time periods: 2011-2014 $1.730 Billion 2015 - nothing 2016-2017 $1.04 Billion 2018-2029 $1.23 Billion 2030-2031 $0.625 Billion Therefore, the company might be able to refinance some or all of this debt pushing out their average maturity to 10 years. Their largest payment of $1.0 Billion comes due in 2016. They may be able to reduce their average interest rate by 100 basis points providing a savings in annual interest expense of $46 million/year or about $0.22/share. This represents a 15% addition to the average analysts earnings estimate of $1.50/year for 2012. In previous conference calls, the company said that provision has already been made for the debt coming due; the $700M in 2011, $300M in 2012, $200M in 2013, and $490M in 2014 and are less than what they already paid in 2010. Their peak cash flow hit due to their structured debt service s/b falling. If their sales slow down has also peaked this quarter, the company should be well positioned to generate increasing quarterly cash flows again. As these earlier maturities get paid off, the rating agencies should (at some time) be upgrading their opinion on the remaining outstanding debt (s/b just over $3 Billion by 2015). This is a good combination to increase stock holder's equity and the stock price: (1) reduced total debt w/ lower annual interest expense, (2) higher quarterly cash flows from day-to-day operations and (3) stabilized sales w/ steady margins at 3.10% one of the highest in the sector. Maybe SVU has reached bottom and the future prospects are only going to get better especially if there is a path to get their LT debt down to $3 Billion by year end 2015. EKS

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