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Rite Aid to offer $270 million in notes to refinance debt
October 19th, 2009
CAMP HILL, Pa. – In a move to refinance debt coming due next year, Rite Aid Corp. plans to offer $270 million of senior secured notes due in 2019.
The company said the debt offering is part of a comprehensive plan to refinance first-lien and second-lien accounts receivable securitization facilities due in September 2010. As of October 16, $475 million was outstanding under the securitization facilities, according to the drug store chain.
Rite Aid unveiled the offering Monday at $250 million, but the amount increased by $20 million when the company announced the terms.
Also as part of the refinancing, Rite Aid is increasing the borrowing under its existing $525 million senior secured term loan due June 2015 by $125 million to $650 million.
Rite Aid said it also aims to amend its senior secured credit facility that will raise the maximum borrowing capacity under its senior secured revolver from $1 billion to $1.175 billion.
The company added that it intends to use the proceeds from the notes offering and from the increased term loan and revolver borrowings to repay and cancel its accounts receivable securitization facilities, as well as to fund related fees and expenses.
Upon the successful completion of the plan, all of the September 2010 debt maturities will have been refinanced, according to Rite Aid.
The new $250 million in notes will be unsecured and unsubordinated obligations of Rite Aid and will be guaranteed by substantially all of its subsidiaries, with guarantees secured on a second-lien basis, the company said.
Fitch Ratings affirmed its "stable" outlook for Rite Aid following the drug chain's announcement of the debt offering. "The stable outlook reflects Rite Aid's completion of 2010 refinancing activities, thus near-term liquidity concerns are alleviated," Fitch stated Monday.
"With the refinancings successfully completed, Fitch anticipates management can turn its full focus on improving core operations, and rating movements will largely depend on Rite Aid's top line and profitability," the rating agency added.
In reporting fiscal 2010 second-quarter results late last month, Rite Aid noted that its liquidity is strong, with $822.3 million of availability on its credit and accounts receivable facilities as of the quarter's end on August 29.
The drug chain said in July that it had obtained a commitment from GE Capital for $290 million of new money for a $1 billion asset-based revolving line of credit. That came about a month after the company announced it had wrapped up $1.9 billion in refinancing.
When reporting first-quarter results in late June, Rite Aid lowered its full-year earnings projection to reflect increased interest expenses from a refinancing plan.
*Editor's Note: Story updated on October 20.