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Spartan Stores, Inc. (NASDAQ:SPTN) today announced the successful completion of a private exchange and sale of $50.0 million aggregate principal amount of newly issued, four year unsecured 6.625% Senior Notes due 2016 ("New Notes") for $40.3 million aggregate principal amount of the Company's existing Convertible Senior Notes due 2027 ("Convertible Notes") and $9.7 million in cash.
The Company plans to call for redemption the remaining outstanding $57.4 million aggregate principal amount of Convertible Notes before March 30, 2013, the end of its current fiscal year. The Company plans to fund this redemption with the net cash proceeds of the private exchange and sale, available cash, and borrowings under its revolving credit facility. The existing Convertible Notes are subject to repurchase by the Company at the option of the holders beginning on May 15, 2014, if not redeemed earlier.
Pre-tax charges of approximately $2.3 million will be recorded in the third quarter of fiscal 2013 related to the private exchange of Convertible Notes. Additionally, pre-tax charges of approximately $2.8 million are expected to be recorded in the fourth quarter of fiscal 2013 concurrent with the planned redemption of the remaining Convertible Notes. Each quarter’s charges primarily relate to the unamortized debt discount and original issuance fees associated with the exchanged or redeemed Convertible Notes. The Company expects to save approximately $3.0 million in annual interest expense as a result of these actions.
"This exchange was an opportunity for us to issue new long-term debt at a relatively attractive rate for the Company, retire higher cost debt and reduce our overall interest expense going forward," said Dave Staples, Spartan's Executive Vice President and Chief Financial Officer. "We believe this exchange and the planned redemption of our outstanding Convertible Notes, in conjunction with our cash, cash flow from operating activities and credit facilities will continue to support our continuing capital requirements in the coming year."