Emmet, Marvin & Martin, LLP
Paul, Weiss, Rifkind, Wharton & Garrison LLP
October 26, 2018
Page 2
We note that the Third Wee Letter—like the Second Wee Letter—adds nothing to the Minority Holders’ unsupported claims of default asserted in the First Wee Letter. In their most recent letter, the Minority Holders again assert, without providing any specifics, that Safeway’s comprehensive responses to their claims of default set forth in the First Response Letter were somehow deficient. They were not. In the Second Response Letter, we pointed out that the Minority Holders have yet to explain how Safeway’s responses were in any way lacking. The Third Wee Letter fails in that regard as well.
In the Third Wee Letter, the Minority Holders assert that Safeway’s pending refinancing transactions (the “Refinancing Transactions”) caused them to renew their claims. (Third Wee Letter at 2.) Specifically, the Minority Holders “maintain that, similar to the incurrence of the 2015 Liens securing the indebtedness under the Albertsons[/Safeway] Credit Agreements without equally and ratably securing the Debentures, the Refinancing Transactions and the Liens securing Indebtedness being incurred in the Refinancing Transactions will constitute further defaults under the Indenture governing the Debentures … .” (Id.)
That assertion is incorrect. Safeway’s refinanced term loans under the Albertsons/Safeway Term Loan Agreement will be secured by the same liens that secure Safeway’s existing term loans under the Albertsons/Safeway Term Loan Agreement. Further, concurrently with the consummation of the Refinancing Transactions, Safeway will use balance sheet cash to repay a significant amount of Safeway’s outstanding Indebtedness under the Albertsons/Safeway Term Loan Agreement, which would benefit the Minority Holders, as reflected in Standard & Poors’ increased recovery assessment for all series of the Safeway notes. (S&P Global Ratings Recovery Report: Albertsons Cos. Inc.’s Recovery Rating Profile, dated October 22, 2018.)
The Minority Holders’ contention that Albertsons’ disclosure of the Refinancing Transactions is what caused them to resurface, after months of silence, is simply a subterfuge for their opportunism. As noted above, the Refinancing Transactions improve the credit quality of the Debentures. Despite that fact, the Minority Holders have asserted a demand for make whole payments, based on 2015 interest rates, for the incurrence of secured debt in 2015, that they did not object to at that time or in the three and a half years that followed—all the while accepting payments of interest on the Debentures.
Finally, we note that the Minority Holders suggest that the holders of Safeway’s 7.45% Senior Debentures due 2027 (the “2027 Debentures”) could make similar arguments as to those debentures as the Minority Holders did in the First Wee Letter. However, any such claims would be deficient for the reasons set forth in the First Response Letter. Moreover, the Minority Holders do not contend that they hold the 2027 Debentures. Accordingly, the Minority Holders have no standing to assert claims relating to the 2027 Debentures, and their assertions with respect to them only serve to further demonstrate that their true motive is to pressure Safeway to pay them a make whole to which they are not entitled.
