The rating agency also said an outright sale of Save-A-Lot, rather than a spinoff, would improve Supervalu’s credit metrics the most. Moody’s said it values Save-A-Lot at $1.3 billion to $1.8 billion.
Supervalu indicated in July it was considering a spinoff of Save-A-Lot. Earlier this month, it told shareholders and federal securities regulators that it was contemplating spinning off the division to a standalone public entity controlled by 80.1% by Supervalu's current stockholders.
In a letter to shareholders, Sam Duncan, CEO of the Minneapolis-based company, said, “We believe separating Save-A-Lot from Supervalu so that it can operate as an independent, publicly traded company is in the best interests of both Supervalu and Save-A-Lot. As two distinct publicly traded companies, Supervalu and Save-A-Lot will each be better positioned to focus on its respective businesses, customers and strategic priorities and to capitalize on growth opportunities.”

According to Moody’s, a spinoff of Save-A Lot, which has been Supervalu’s primary growth segment, would turn the company into a predominantly wholesale distributor with lower margins and lower growth. Operating margins and revenue declined in the company's last reported quarter for its wholesale distribution and retail grocery segments, owing to deflationary pressures, lower traffic and customer attrition, Moody’s pointed out.
"We do not expect the reduction in Supervalu's debt as a result of the spinoff to completely offset the increase in its leverage from the loss of EBITDA generated by Save-A-Lot," Moody’s said. "The actual impact on credit metrics will depend on the proceeds generated by the spinoff and how much would go toward debt reduction."