Save A Lot reaches agreement to cut $400 million in debt

January 6, 2020

By Annika Merrilees | St. Louis Post-Dispatch

ST. Ann — Save A Lot will reduce its debt by more than $400 million under an agreement with a majority of its lenders.

The agreement also includes $138 million in new capital, the St. Ann-based discount grocer said in an announcement Friday.

“The agreement with our lenders is an important step in securing Save A Lot’s long-term success,” Save A Lot CEO Kenneth McGrath said in a statement. “This is a significant statement of confidence in our business and gives us the appropriate levels of capital to compete effectively.”

The deal was approved by lenders representing 67% of the company’s term loan credit agreement. It will significantly reduce its annual interest expense.

“It’s a positive, no doubt,” said Mickey Chadha, a vice president at the financial services and analyst firm Moody’s. “But it’s a lifeline, and it is not a panacea for what is ailing the company.”

It has to increase its revenues, Chadha said.

Bloomberg report in August placed Save A Lot at more than $820 million of net debt outstanding.

Save A Lot was founded in Cahokia in 1977. It was sold in 1988 to Hazelwood-based wholesaler Wetterau, which was bought by Minneapolis-based Supervalu Inc. in 1993.

Save A Lot grew from 350 stores in 1992 to more than 1,300 in 2012, but then hit a plateau. Supervalu sold Save A Lot in 2016 to the private equity firm Onex Corp. in a $1.4 billion deal.

Reuters reported in May 2019 that Save A Lot was exploring a sale of all or part of the company.

Today Save A Lot has over 1,100 corporate and licensed stores in 33 states.

Jason Long, founder of consulting firm Eye on Retail in St. Louis, said the country’s discount grocery category has “filled up” and become a difficult sector to compete in.

Strong history in certain markets, like St. Louis, which has earned it loyalty, Long said. Its locations often serve areas with few other grocery stores. And in recent years it has modernized some of its stores and established partnerships, like the Amazon services it announced in November.

“I think they’ve already taken a couple good steps,” Long said. “But it takes a while.”

Paired with other moves, this deal has the potential to bring real change to the company, said Burt P. Flickinger III, the managing director for Strategic Resource Group.

“This will be a good pivot point to turn the company around,” Flickinger said. “There’s a lot of potential here.”

The deal is expected to close in the first quarter of 2020.