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Supervalu (NYSE:SVU) has had a lot of activity lately. Today's volume was 11.5 million, up over its average of 8.2 million shares traded daily. Supervalu ended the day closing up 3.5% today at $3.68.

My Analysis

Supervalu has just filed an 8-K at the end of the trading day with the Securities and Exchange Commission. The SEC filing states that Supervalu is going to be meeting with potential lenders in order to refinance its debt and credit facilities. It also confirms that the deal with the Cerberus-led consortium and Symphony investors will go through for 30% of SVU stock at $4 a share. Supervalu will replace its existing $1.6 billion ABL revolving credit facility with a $900 million ABL revolving credit facility, lowering it by $700 million. The company also will be replacing its senior secured term loan of $850 million with a $1.5 billion new senior secured term loan. Supervalu's real estate and its chain of 'Save-A-Lot' stock will secure this loan, with the company refinancing its debt in confirmation of the deal to go through with Cerberus. The $2.4 billion credit facility will allow Supervalu to get rid of its prior credit agreements, restricting the amount of debt it could have in relation to earnings. Supervalu also has its $1 billion 8 percent notes due in May 2016. Moody's has recently upgraded the rating of Supervalu's new term loan to B1, as well as their outlook, which has been changed from negative to stable.

I owned a small amount of Supervalu's shares in early January, and recently added more in the $3.50's, when the stock jumped up after the announcement to sell off parts of the company. With Supervalu selling off many of its losing and unprofitable businesses in exchange for cash to help with its long-term debt, I believe this is positive for the company. The shares tender expires February 25th, and with the number of positive signs pointing in favor of the stock, I believe the long-term potential of the stock is now, with a change of a 5-10% gain, even within the next 3-4 weeks.

Analysts' Estimates

The last month has had a number of analysts weigh in on the company. Analysts at Citigroup reiterated a neutral rating but upgraded their price target from $3.00 to $4.00. BMO Capital Markets reiterated a market perform rating but raised their price target from $2.00 to $4.00 per share. Cantor Fitzgerald reiterated a buy rating on Supervalu, which they have had for a while now, and upgraded their price target to $6.00 a share.

Summary and Conclusions

Supervalu has sold off many of its losing and non-profitable chains to Cerberus. With continually owning 'Save-A-Lot', one of its best chains, the present intention of refinancing its debt, and the positive light analysts and Moody's have put lately, I believe this should help the stock reach the $4.00 mark.

Source: Supervalu: Still Some Upside