Albertsons 2007 Annual Report Download - page 36

the Company’s current credit ratings, is 0.20 percent. As of February 24, 2007, there were
$
159 of outstanding
borrowings under this program. As of February 24, 2007, there were
$
225 of accounts receivable pledged a
s
collateral, classified in Accounts receivable in the Compan
y
’s Februar
y
24, 2007 Consolidated Balance Sheet.
Due to the Company’s intent to renew the facility or refinance it with the Revolving Credit Facility, the facility is
c
l
ass
ifi
e
di
n Long-term
d
e
b
t
i
nt
h
eFe
b
ruary 24, 2007 Conso
lid
ate
d
Ba
l
ance S
h
eet
.
I
n November 2001, the Company sold zero-coupon convertible debentures due 2031. On October 2, 2006, the
C
ompany purchased
$
213 of these debentures when over 80 percent of the holders put their debentures to the
C
ompan
y
for cash. Holders of the debentures ma
y
require the Compan
y
to purchase all or a portion of the
remaining
$
53 debentures on the first day of October 2011 at a purchase price equal to the accreted value of the
d
ebentures (which would include accrued but unpaid interest) at
$
409.08 (not in millions) per debenture. Sinc
e
the current credit ratin
g
s of the Compan
y
are BB or lower as rated b
y
Standard & Poor’s ratin
g
service, and Ba
3
o
r lower as rated by Moody’s rating service, the debentures are currently convertible into shares of the
C
ompany’s common stock at the option of the holders. In the event of conversion, 9.
6
434 (not in millions) share
s
o
f the Compan
y
’s common stock will be issued per each thousand dollars of debentures, or approximatel
y
1.
5
shares, should all remaining debentures be converted. As of February 24, 2007, no holders have elected
convers
i
on o
f
t
h
e
d
e
b
entures. T
h
e Company may re
d
eem a
ll
or a port
i
on o
f
t
h
e rema
i
n
i
ng
d
e
b
entures at any t
i
me
a
t a purchase price equal to the sum of the issue price plus accrued ori
g
inal issue discount as of the redemption
d
ate. Due to the holders’ ability to convert the debentures to common stock, the Company’s previou
s
a
nnouncement o
fi
ts
i
ntent to sett
l
et
h
e
d
e
b
entures
i
n cas
h
an
d
t
h
e Company’s a
bili
ty to ca
ll
t
h
e
d
e
b
entures
f
or
cash at an
y
time, the debentures are classified as current debt.
T
he Company assumed 46,000,000 of 7.25 percent mandatory convertible securities (“Corporate Units”) upo
n
the Ac
q
uisition of New Albertsons. Each Cor
p
orate Unit consisted of a forward stock
p
urchase contract and,
initially, a 2.
5
percent ownership interest in one of Albertsons’ senior notes (which were assumed by New
A
lb
ertsons
i
n connect
i
on w
i
t
h
t
h
e Acqu
i
s
i
t
i
on) w
i
t
h
apr
i
nc
i
pa
l
amount o
f
one t
h
ousan
dd
o
ll
ars, w
hi
c
h
corresponds to a twent
y
-five dollar principal amount of senior notes. The purchase contracts
y
ield 3.
5
percent pe
r
year on the stated amount of twenty-five dollars and the senior notes yield 3.7
5
percent per year.
I
n October 200
6
, the Compan
y
made an offer to purchase all outstandin
g
Corporate Units. At the close of the
o
ffer, the Company purchased approximately 35,000,000 Corporate Units at a purchase price of
$
25.22 pe
r
C
orporate Un
i
t,
i
nc
l
u
di
ng accrue
di
nterest. In January 2007, t
h
e Company purc
h
ase
d
approx
i
mate
l
y 4,000,00
0
C
orporate Units in a privatel
y
ne
g
otiated transaction at a purchase price of $25.52 per Corporate Unit, includin
g
a
ccrued interest. The Company paid an aggregate amount of approximately
$
979, including accrued interest, and
recognized a gain of approximately
$
1 related to these purchases.
I
n February 2007, pursuant to the terms of the Corporate Units, the senior notes held as components of Corporat
e
Un
i
ts (t
h
e“P
l
e
d
ge
d
Sen
i
or Notes”) were remar
k
ete
db
yt
h
e remar
k
et
i
ng agent. T
h
roug
h
t
h
e remar
k
et
i
ng, t
h
e
C
ompan
y
purchased all of the remarketed senior notes for approximatel
y
$180 and reco
g
nized a
g
ain of less than
$
1. The proceeds of the remarketing of the Pledged Senior Notes (net of remarketing fee) were delivered to th
e
co
ll
atera
l
agent an
d
use
d
to purc
h
ase U.S. treasury secur
i
t
i
es, matur
i
ng on or a
b
out t
h
e purc
h
ase contrac
t
settlement date of Ma
y
16, 2007 (the “Purchase Contract Settlement Date”). The treasur
y
securities will serve a
s
collateral for the holders’ obligations under the purchase contracts associated with the Corporate Units
.
As of Februar
y
24, 2007, under the terms of the purchase contracts, the Compan
y
would be required to issue a
minimum of 1.1 shares and a maximum of 1.4 shares of its common stock for the remaining purchase contracts
.
If
t
h
e purc
h
ase contracts
h
a
db
een sett
l
e
d
at Fe
b
ruary 24, 2007, t
h
e Company wou
ld h
ave rece
i
ve
d
approx
i
mate
l
y
$
45 of net cash and would have issued approximatel
y
1.2 shares of its common stock. Upon settlement of each
purchase contract, the Company will receive the stated amount of twenty-five dollars on the purchase contract
a
nd will issue the requisite amount of Acquisition Consideration (
$
20.35 in cash and 0.182 SUPERVALU shares
per share of Albertsons common stock sub
j
ect to the settlement rate). The net amount of cash received will be
recorded as an increase to stockholders’ equity
.
30