Tue 03/30/2021 14:43 PM
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Relevant Items:
United Natural Foods Covenants Tear Sheet, Debt Document Overviews
United Natural Foods Debt Documents

United Natural Foods is a distributor of organic, specialty and conventional grocery and nonfood products primarily in the United States and Canada. It is the primary distributor for Whole Foods Market.

United Natural Foods, along with certain U.S. and Canadian subsidiaries, is a borrower under a secured $2.1 billion ABL Credit Facility. The ABL Credit Facility is guaranteed by domestic, wholly owned, restricted subsidiaries, with customary exceptions, and material Canadian subsidiaries. The ABL lenders, in addition to holding the priority lien on U.S. accounts, U.S. inventory, U.S. deposit accounts and related U.S. assets, have a junior lien on collateral securing the Term Loan. Continue reading for our Americas Covenants team's analysis of the United Natural Foods term loan repricing and Request a Trial for access to the linked debt documents, tear sheets, and summaries as well as our coverage of thousands of other stressed/distressed debt situations.

United Natural Foods and its acquired subsidiary Supervalu are borrowers under the $1.95 billion Term Loan, which has the same guarantor group as the ABL Credit Facility minus the Canadian guarantors. It is secured by a priority lien on real property in excess of $10 million, tangible and intangible assets of each loan party, and the equity interests of material domestic restricted subsidiaries and 65% of voting securities directly owned by the loan parties. The Term Loan lenders have a junior lien on collateral securing the ABL Credit Facility.

United Natural Foods is the issuer of $500 million in unsecured 6.750% senior notes due 2028, which are guaranteed by the U.S. guarantors that guarantee the Term Loan and ABL Credit Facility.

On February 11, the company and its lenders amended and repriced the Term Loan, reducing the margin to 3.50% for LIBOR-based loans. No other material terms were changed.

The company’s capital structure as of Jan. 30, the end of the second quarter for fiscal year 2021, is as follows:
United Natural Foods Capital Structure

Covenant Conclusions

Liquidity and financial covenant - Liquidity as of Jan. 30 was $1.16 billion. The ABL Credit Facility contains a requirement to maintain a fixed charge coverage ratio of 1.0x that is triggered when Aggregate Availability is less than the greater of $235 million and 10% of the Aggregate Borrowing Base. As of Jan. 30, the Aggregate Availability was greater than either of those thresholds, and the financial covenant was not tested. We estimate the FCCR was 2.84x.

Debt and liens - We estimate that United Natural Foods can incur $2.78 billion of secured debt on a pari basis, or $1.73 billion of secured debt on a junior basis, or $1.27 billion of unsecured debt. Furthermore, we estimate that $25 million of debt can be structurally senior.

Restricted Payments, Investments, Prepayments - As of Jan. 30, we estimate there was capacity for $25 million of restricted payments, $75 million of investments in nonguarantor restricted subsidiaries, $215 million of general-purpose investments plus additional investments based on 50% of CNI from Aug. 1, 2018. Up to $115 million of the senior notes can be repurchased on the open market, plus any remaining capacity under CNI prong of Available Amount.

--Richard Barbour II
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