Albertson’s $1.63 billion eight-year notes backing Safeway buy is expected September business

By Paul A. Harris

Portland, Ore., Aug. 25 – Albertson’s LLC is expected to bring its $1,625,000,000 offering of eight-year senior secured notes to the market in September, according to market sources.

Proceeds will be used to fund the acquisition of Pleasanton, Calif.-based food and drug retailer Safeway, Inc.

Debt financing also includes a $9.45 billion credit facility.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Morgan Stanley Senior Funding Inc., Barclays, Deutsche Bank Securities Inc., PNC Capital Markets LLC, US Bank and SunTrust Robinson Humphrey Inc. are the lead banks on the debt financing.

Other funds for the transaction will come from around $1.25 billion of equity and cash on hand.

Safeway’s existing debt is expected to be repaid at closing, other than capital leases and its 5% senior notes due 2019, 3.95% notes due 2020, 4¾% senior notes due 2021, 7.45% debentures due 2027 and 7¼% debentures due 2031.

Under the agreement, Safeway is being bought for $32.50 per share in cash, and shareholders will have the right to receive pro-rata distributions of net proceeds from primarily non-core assets with an estimated value of $3.65 per share.

Closing is targeted for the fourth quarter of this year.

The issuing entity is AB Acquisition, which is controlled by a Cerberus Capital Management LP-led investor group, which also includes Kimco Realty Corp., Klaff Realty LP, Lubert-Adler Partners LP and Schottenstein Stores Corp.

Albertson’s is a Boise, Idaho-based grocery company.

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