Kroger Announces Extension of Exchange Offers and Consent Solicitations for Albertsons Companies, Inc. Notes

Rhea-AI Summary

Kroger (NYSE:KR) has extended the expiration date of its exchange offers and consent solicitations for Albertsons Companies, Inc. (NYSE:ACI) notes from September 13, 2024, to September 17, 2024. The exchange offers involve up to $7,441,608,000 aggregate principal amount of new Kroger notes and cash. As of September 11, 2024, significant portions of various ACI note series have been tendered, with many exceeding 90% participation. The exchange offers and consent solicitations are conditional upon the closing of Kroger's merger with ACI, expected in Q4 2024. Settlement is anticipated shortly after the expiration date and merger closing. The exchange offers remain subject to certain conditions and are only available to qualified institutional buyers or non-U.S. persons outside the United States.

Positive

• High participation rates in the exchange offers, with many ACI note series exceeding 90% tender
• Progress towards completing the merger with Albertsons Companies, Inc.
• Potential consolidation of debt under Kroger's name, which may lead to more efficient capital structure

Negative

• Extension of the exchange offer deadline may indicate challenges in reaching desired participation levels
• The exchange offers and merger completion are subject to various conditions and regulatory approvals
• Potential increase in Kroger's debt load following the completion of the exchange offers and merger

Insights

Financial Analyst

The extension of Kroger's exchange offers for Albertsons' notes is a neutral development in the ongoing merger process. With 94.85% to 98.08% of principal amounts tendered for most series, the high participation rate suggests strong bondholder support. However, some series, particularly older debentures, show lower participation.

This extension allows more time for remaining bondholders to participate, potentially smoothing the post-merger debt structure. The $7.4 billion total offer size is significant, indicating the scale of debt restructuring involved in this merger. Investors should note that while the exchange offers are contingent on the merger closing, the merger itself is not dependent on these offers' completion.

Legal Expert

The extension of both the exchange offers and consent solicitations is a standard procedural move in complex mergers. It's noteworthy that for many note series, Kroger has already received the requisite consents to amend the indentures. This suggests strong progress in aligning debt terms with the post-merger entity's structure.

The fact that supplemental indentures have been executed for the 'Consented Series' but will only become operative upon settlement is a clever legal strategy. It ensures changes are ready to implement but remain contingent on deal closure, protecting both parties. The varying consent levels across different note series highlight the complexity of harmonizing diverse debt instruments in a major merger.

Market Research Analyst

This extension signals that Kroger is meticulously managing the debt aspect of its Albertsons acquisition. The high tender rates for most note series indicate strong market acceptance of the deal terms. However, the lower participation in some older, smaller note series suggests potential holdout investors or complex legacy debt structures.

The expected closing in Q4 2024 and potential for further extensions imply a lengthy regulatory review process. Investors should monitor for any signals of regulatory concerns or required divestitures that could impact the deal's value. The successful debt exchange is important for Kroger to optimize its capital structure post-merger, potentially affecting its financial flexibility and future growth strategies in the highly competitive grocery sector.

CINCINNATI, Sept. 11, 2024 /PRNewswire/ -- The Kroger Co. (NYSE:KR) (the "Company" or "Kroger") announced today that it has extended the expiration date of the previously announced offers to exchange (the "Exchange Offers") any and all outstanding notes (the "ACI Notes") of Albertsons Companies, Inc. (NYSE:ACI) ("ACI"), New Albertsons, L.P. ("NALP"), Safeway Inc. ("Safeway"), Albertson's LLC ("Albertsons"), Albertsons Safeway LLC ("ASL") and American Stores Company, LLC ("ASC"), as applicable, for up to $7,441,608,000 aggregate principal amount of new notes to be issued by the Company (the "Kroger Notes") and cash. Additionally, Kroger announced today that it has extended the expiration date for the related solicitations of consents (collectively, the "Consent Solicitations"), to adopt certain proposed amendments (the "Proposed Amendments") to the indentures (collectively, the "ACI Indentures") governing the ACI Notes, solely with respect to the Unconsented Series (as defined herein). The Company hereby extends such expiration date from 5:00 p.m. New York City time on September 13, 2024 to 5:00 p.m. New York City time on September 17, 2024 (as the same may be further extended, the "Expiration Date").

As of August 29, 2024, the requisite number of consents were received to adopt the Proposed Amendments with respect to the Consented Series (as defined herein), and the relevant parties had executed supplemental indentures to the applicable ACI Indentures implementing the Proposed Amendments. The Proposed Amendments will only become operative upon the settlement of the Exchange Offers, which is expected to occur promptly after the Expiration Date.

As of 5:00 p.m., New York City time, on September 11, 2024, the principal amounts for each series of ACI Notes set forth in the table below have been validly tendered and not validly withdrawn:

Title of Series of ACI Notes	Issuer(s)	CUSIP/ISIN No.	Principal Amount Outstanding	ACI Notes Tendered as of 5:00 p.m., New York City time on September 11, 2024
				Principal Amount Tendered	Percent of Principal Amount Outstanding Tendered
3.250% Senior Notes due 2026*	ACI, NALP, Safeway and Albertsons	144A: 013092 AF8 / US013092AF88   Reg S: U0125L AG5 / USU0125LAG50	$750,000,000	$711,397,000	94.85 %
7.500% Senior Notes due 2026*	ACI, NALP, Safeway and Albertsons	144A: 013092 AA9 / US013092AA91   Reg S: U0125L AA8 / USU0125LAA80	$600,000,000	$586,856,000	97.81 %
4.625% Senior Notes due 2027*	ACI, NALP, Safeway and Albertsons	144A: 013092 AC5 / US013092AC57   Reg S: U0125L AC4 / USU0125LAC47   JAN: U0125LAF7 / USU0125LAF77	$1,350,000,000	$1,313,661,000	97.31 %
5.875% Senior Notes due 2028*	ACI, NALP, Safeway and Albertsons	144A: 013092 AB7 / US013092AB74   Reg S: U0125L AB6 / USU0125LAB63	$750,000,000	$728,604,000	97.15 %
6.500% Senior Notes due 2028*	ACI, NALP, Safeway, Albertsons and ASL	144A: 01309Q AA6 / US01309QAA67   Reg S: U0126B AA9 / USU0126BAA99	$750,000,000	$731,993,000	97.60 %
3.500% Senior Notes due 2029*	ACI, NALP, Safeway and Albertsons	144A: 013092 AG6 / US013092AG61   Reg S: U0125L AH3 / USU0125LAH34   DEC: U0125LAJ9 / USU0125LAJ99	$1,350,000,000	$1,324,098,000	98.08 %
4.875% Senior Notes due 2030*	ACI, NALP, Safeway and Albertsons	144A: 013092 AE1 / US013092AE14   Reg S: U0125L AE0 / USU0125LAE03	$1,000,000,000	$971,941,000	97.19 %
7.450% Senior Debentures due 2027**	Safeway	786514AS8 / US786514AS84	$120,078,000	$37,913,000	31.57 %
7.250% Senior Debentures due 2031**	Safeway	786514BA6 / US786514BA67	$261,099,000	$104,153,000	39.89 %
8.000% Debentures due 2026**	ASC	030096AF8 / US030096AF88	$2,902,000	$10,000	0.34 %
7.100% Medium-Term Notes, Series B, due 2028*	ASC	03009MBB1 / US03009MBB19	$756,000	$585,000	77.38 %
7.500% Debentures due 2037**	ASC	030096AH4 / US030096AH45	$143,000	-	0.00 %
7.110% Medium-Term Notes, Series B due 2027**	NALP	01310QCH6 / US01310QCH65	$11,045,000	$595,000	5.39 %
7.150% Medium-Term Notes, Series B due 2027**	NALP	01310QCK9 / US01310QCK94	$310,000	-	0.00 %
6.560% Medium-Term Notes, Series B due 2027**	NALP	01310QCL7 / US01310QCL77	$210,000	$25,000	11.90 %
6.570% Medium-Term Notes, Series C due 2028*	NALP	01310QCW3 / US01310QCW33	$24,278,000	$20,671,000	85.14 %
6.520% Medium-Term Notes, Series C due 2028**	NALP	01310QCZ6 / US01310QCZ63	$5,170,000	$8,000	0.15 %
6.530% Medium-Term Notes, Series C due 2028**	NALP	01310QCY9 / US01310QCY98	$12,000,000	$79,000	0.66 %
6.625% Medium-Term Notes, Series C due 2028**	NALP	01310QDB8 / US01310QDB86	$19,898,000	$12,279,000	61.71 %
6.630% Medium-Term Notes, Series C due 2028**	NALP	01310QDA0 / US01310QDA04	$6,000,000	-	0.00 %
7.750% Debentures due 2026**	NALP	013104AC8 / US013104AC87	$56,536,000	$21,518,000	38.06 %
7.450% Senior Debentures due 2029**	NALP	013104AF1 / US013104AF19	$127,206,000	$64,364,000	50.60 %
8.700% Senior Debentures due 2030*	NALP	013104AH7 / US013104AH74	$135,098,000	$109,342,000	80.94 %
8.000% Senior Debentures due 2031*	NALP	013104AL8 / US013104AL86	$108,879,000	$82,659,000	75.92 %
* Indicates series that have received requisite consents (the "Consented Series") ** Indicates series that have not received requisite consents as of the date hereof (the "Unconsented Series")

Tenders of ACI Notes made pursuant to the Exchange Offers (but not consents delivered pursuant to the Consent Solicitations) may be validly withdrawn at or prior to the Expiration Date.

The Exchange Offers and Consent Solicitations are being made pursuant to the terms and subject to the conditions described in the confidential offering memorandum and consent solicitation statement dated August 15, 2024 (the "Offering Memorandum"), as amended by a press release issued by the Company on August 29, 2024 and as further amended by this press release, and is conditioned upon the closing of the merger of a wholly owned subsidiary of the Company with and into ACI, with ACI surviving the merger as a direct, wholly owned subsidiary of the Company (the "Merger"), which condition may not be waived by Kroger, and certain other conditions that may be waived by Kroger. The closing of the Merger is not conditioned upon the completion of the Exchange Offers or Consent Solicitations.

The settlement of the Exchange Offers and Consent Solicitations is expected to occur promptly after the Expiration Date and is expected to occur on or promptly after the closing date of the Merger. The Merger is expected to close during the fourth quarter of calendar year 2024 and, as a result, the Expiration Date may be further extended by the Company. Kroger currently anticipates providing notice of any such extension in advance of the Expiration Date. If, at the Expiration Date, the conditions to the Exchange Offers and Consent Solicitations (other than the consummation of the Merger) have been satisfied or waived, then settlement will occur on or about the date that the Merger is consummated.

Except as described in this press release and the Company's press release issued on August 29, 2024, all other terms of the Exchange Offers and Consent Solicitations remain unchanged.

Documents relating to the Exchange Offers and Consent Solicitations will only be distributed to eligible holders of ACI Notes who complete and return an eligibility certificate confirming that they are either a "qualified institutional buyer" under Rule 144A or not a "U.S. person" and outside the United States under Regulation S for purposes of applicable securities laws. The complete terms and conditions of the Exchange Offers and Consent Solicitations are described in the Offering Memorandum, copies of which may be obtained by contacting the exchange agent and information agent in connection with the Exchange Offers and Consent Solicitations, at (855) 654-2015 (toll-free) or (212) 430-3774 (banks and brokers), or by email at contact@gbsc-usa.com. The eligibility certificate is available electronically at: https://gbsc-usa.com/eligibility/kroger and is also available by contacting Global Bondholder Services Corporation.

This press release does not constitute an offer to sell or purchase, or a solicitation of an offer to sell or purchase, or the solicitation of tenders or consents with respect to, any security. No offer, solicitation, purchase or sale will be made in any jurisdiction in which such an offer, solicitation or sale would be unlawful. The Exchange Offers and Consent Solicitations are being made solely pursuant to the Offering Memorandum and only to such persons and in such jurisdictions as are permitted under applicable law.

The Kroger Notes offered in the Exchange Offers have not been registered under the Securities Act of 1933, as amended, or any state securities laws. Therefore, the Kroger Notes may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws.

About Kroger

At The Kroger Co. (NYSE:KR), we are dedicated to our Purpose: to Feed the Human Spirit™. We are, across our family of companies nearly 420,000 associates who serve over eleven million customers daily through a seamless digital shopping experience and retail food stores under a variety of banner names, serving America through food inspiration and uplift, and creating #ZeroHungerZeroWaste communities.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended. These statements are based on Kroger's assumptions and beliefs in light of the information currently available to the Company. These statements are subject to a number of known and unknown risks, uncertainties and other important factors, including the risks and other factors discussed in the "Risk Factors" section of the Offering Memorandum, that could cause actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward looking statements. Such statements are indicated by words or phrases such as "achieve," "affect," "anticipate," "assumptions," "believe," "committed," "continue," "could," "deliver," "effect," "enable," "estimate," "expects," "future," "goal," "growth," "guidance," "intended," "likely," "maintain," "may," "model," "plan," "position," "program," "result," "strategy," "strong," "trend," "will" and "would," and variations of such words and similar phrases. Forward-looking statements are subject to inherent risks and uncertainties. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. These include:

• the extent to which Kroger's sources of liquidity are sufficient to meet its requirements may be affected by the state of the financial markets and the effect that such condition has on its ability to issue commercial paper at acceptable rates. Kroger's ability to borrow under its committed lines of credit, including its bank credit facilities, could be impaired if one or more of Kroger's lenders under those lines is unwilling or unable to honor its contractual obligation to lend to Kroger, or in the event that global pandemics, natural disasters or weather conditions interfere with the ability of Kroger lenders to lend to Kroger. Kroger's ability to refinance maturing debt may be affected by the state of the financial markets;
  
  
• Kroger's ability to achieve sales, earnings, incremental FIFO operating profit, and adjusted free cash flow goals, which may be affected by: its proposed transaction with ACI including, among other things, Kroger's ability to consummate the proposed transaction and related divestiture plan, including on the terms of the Merger Agreement and divestiture plan, on the anticipated timeline, with the required regulatory approvals, and/or resolution of pending litigation challenging the Merger; labor negotiations; potential work stoppages; changes in the unemployment rate; pressures in the labor market; changes in government-funded benefit programs; changes in the types and numbers of businesses that compete with us; pricing and promotional activities of existing and new competitors, and the aggressiveness of that competition; Kroger's response to these actions; the state of the economy, including interest rates, the inflationary, disinflationary and/or deflationary trends and such trends in certain commodities, products and/or operating costs; the geopolitical environment including wars and conflicts; unstable political situations and social unrest; changes in tariffs; the effect that fuel costs have on consumer spending; volatility of fuel margins; manufacturing commodity costs; supply constraints; diesel fuel costs related to Kroger's logistics operations; trends in consumer spending; the extent to which Kroger's customers exercise caution in their purchasing in response to economic conditions; the uncertainty of economic growth or recession; stock repurchases; changes in the regulatory environment in which Kroger operates; Kroger's ability to retain pharmacy sales from third party payors; consolidation in the healthcare industry, including pharmacy benefit managers; Kroger's ability to negotiate modifications to multi-employer pension plans; natural disasters or adverse weather conditions; the effect of public health crises or other significant catastrophic events; the potential costs and risks associated with potential cyber-attacks or data security breaches; the success of Kroger's future growth plans; the ability to execute Kroger's growth strategy and value creation model, including continued cost savings, growth of Kroger's alternative profit businesses, and Kroger's ability to better serve its customers and to generate customer loyalty and sustainable growth through its strategic pillars of Fresh, Our Brands, Data & Personalization, and Seamless; the successful integration of merged companies and new partnerships; Kroger's ability to maintain an investment grade credit rating; and the risks relating to or arising from its proposed nationwide opioid litigation settlement, including our ability to finalize and effectuate the settlement, the scope and coverage of the ultimate settlement and the expected financial or other impacts that could result from the settlement;
  
  
• Kroger's ability to achieve these goals may also be affected by its ability to manage the factors identified above. Kroger's ability to execute its financial strategy may be affected by its ability to generate cash flow;
  
  
• Kroger's effective tax rate may differ from the expected rate due to changes in tax laws, the status of pending items with various taxing authorities, and the deductibility of certain expenses; and
  
  
• the outcome of the Exchange Offers and Consent Solicitations. 

The Company cannot fully foresee the effects of changes in economic conditions on Kroger's business. Other factors and assumptions not identified above, including those discussed in the "Risk Factors" section of the Offering Memorandum, the "Risk Factors" section in Kroger's most recently filed Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and in any subsequent documents that Kroger files with the U.S. Securities and Exchange Commission, could also cause actual results to differ materially from those set forth in the forward-looking information. Accordingly, actual events and results may vary significantly from those included in, contemplated or implied by forward-looking statements made by Kroger or Kroger's representatives. The Company undertakes no obligation to update the forward-looking information contained in this press release.

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SOURCE The Kroger Co.

FAQ

What is the new expiration date for Kroger's exchange offers for Albertsons notes?

Kroger (KR) has extended the expiration date for its exchange offers and consent solicitations for Albertsons Companies, Inc. notes to September 17, 2024, at 5:00 p.m. New York City time.

What is the total aggregate principal amount of new Kroger notes offered in the exchange?

Kroger (KR) is offering up to $7,441,608,000 aggregate principal amount of new Kroger notes and cash in exchange for outstanding Albertsons Companies, Inc. notes.

When is the Kroger-Albertsons merger expected to close?

The merger between Kroger (KR) and Albertsons Companies, Inc. is expected to close during the fourth quarter of calendar year 2024.

Are the Kroger exchange offers conditional on the merger closing?

Yes, the Kroger (KR) exchange offers and consent solicitations are conditional upon the closing of the merger with Albertsons Companies, Inc., and this condition cannot be waived by Kroger.