10:00 PM PST on Friday, November 12, 2010

The Press-Enterprise

Stater Bros. Holdings plans to issue $255 million in corporate bonds as part of a deal to refinance existing debt at a lower interest rate.

The San Bernardino-based supermarket chain is raising new capital to redeem $525 million in notes that are due in June 2012. The rate on those notes is 8.125 percent.

Stater Bros. will save considerably on the new bonds, which will be issued at 7.375 percent, said Phil Smith, chief financial officer for Stater Bros.

In addition to the $255 million bond issue, the company will pay out $132 million in cash and will take out a $145 million loan with a four-year term and an interest rate 2.5 percentage points above the London Interbank Offered Rate.

Together, the transactions will reduce Stater Bros. overall debt load by about $125 million, according to Smith.

And interest rate reductions are expected to save about $16 million to $18 million per year.

Smith said the deal is getting good response from lenders and will enable Stater Bros. to “reduce costs to stay competitive and, hopefully, pass on some price savings” to customers.

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