Roundy's Secures Financing for Dominick's Buy

Milwaukee-based Roundy's Inc. is lining up financing for its $36 million purchase of 11 closing Dominick's locations in the Chicago area from Safeway Inc. that will be rebannered as Mariano's Fresh Market stores in 2014.

Roundy's plans to offer $200 million in senior secured second lien notes that will fund the store purchase and also be used to prepay a portion of the term loan under its first lien credit facility. The Dominick's deal is a cash and lease assumption transaction; the deal also includes the related purchase of $10 million of net inventory.

The company will also amend its first lien credit agreement to increase financial flexibility by relaxing certain covenants. The notes offering is contingent upon the effectiveness of the amendment to the first lien credit facility. However, the portions of the amendment that provide increased financial flexibility will not become effective until closing of the Chicago stores purchase if it's not completed before or concurrently with closing of the notes offering.

Mariano's Vying for Market Leadership

Roundy's previously announced its plan to acquire 11 Dominick's stores of the 72-unit chain that Safeway is shutting down by the end of the year whether or not the locations find new owners. The deal will nearly double the size of the popular Mariano's chain, which plans to eventually have up to 50 stores throughout the Chicago metro area. Some analysts have speculated that the Dominick's deal, coupled with additional new store openings, will allow Mariano's to become the Chicago area's No. 2 grocery chain, behind market leader Jewel-Osco, within a few years. Whole Foods Market also has announced plans to acquire several Dominick's stores.

Founded in Milwaukee in 1872, Roundy’s operates 163 retail grocery stores and 101 pharmacies under the Pick ’n Save, Rainbow, Copps, Metro Market and Mariano’s retail banners in Wisconsin, Minnesota and Illinois.

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