As previously disclosed by Albertsons Companies, Inc., outside counsel to the company’s wholly-owned subsidiary, Safeway Inc., has received letters from a law firm purporting to represent holders of the 7.25% Senior Debentures due February 2031 (the “2031 Safeway Notes”) issued by Safeway, alleging that the incurrence of liens securing the Albertsons/Safeway term loan and asset-based revolving credit facilities violated the indenture governing such notes. Safeway has not received a notice of default.
Consistent with Safeway’s previously disclosed responses, the company and Safeway believe that the allegations in the letters are without merit. Safeway has filed a complaint in the Supreme Court of the State of New York, County of New York, seeking injunctive relief and a declaratory judgment that the incurrence of liens under the Albertsons/Safeway term loan and asset-based revolving credit facilities do not violate the indenture. Safeway is also seeking to enjoin the trustee under the indenture from declaring a default.
“At all times, Safeway has been and will be in compliance with the indenture governing the Safeway notes,” said Robert B. Dimond, Executive Vice President and Chief Financial Officer of Albertsons Companies.
“Our balance sheet remains strong and we have ample liquidity, including cash on hand, operating cash flow and availability under our asset-based revolving credit facility,” said Mr. Dimond. In the unlikely event that Safeway is found to be in breach of the indenture, the company believes there are a number of solutions that could be implemented within the cure period provided under the indenture.
In addition, in connection with the company’s ongoing refinancing transactions, the company recently completed the syndication of its new $2 billion term loan, which it expects to close on in the next week. As a result of the refinancing transactions, the company expects to reduce its secured borrowings by approximately $600 million and extend its maturity profile.
