CAMP HILL, Pa. — Rite Aid Corp. has completed an offering of $500 million in senior secured notes initiated earlier this month as part of a series of debt refinancing transactions.
The company said Friday that it had tendered about $419.2 million of the $500 million cash tender offer of 7.5% senior secured notes due 2017. The offer is being funded with a new $500 million second-lien term loan plus cash and/or borrowings under the drug chain’s credit revolver.
The tender offer expires on July 5. Rite Aid said it has called the outstanding notes for redemption but that holders of those notes may still tender their notes before the expiration date.
On June 18, Rite Aid announced an "upsized" debt offering from one made the day before. The offering of $810 million in 6.75% unsecured senior notes maturing in 2021 was $410 million more than the senior notes offering announced on June 17.
Rite Aid reported Friday that the $810 million offering of 6.75% senior notes due in 2021 is slated to close on July 2. The proceeds, together with cash and/or borrowings under its revolver, will be used to fund the company’s ongoing tender offer for its outstanding 9.5% senior notes maturing in 2017.
On Thursday, Fitch Ratings reiterated its "stable" rating outlook for Rite Aid, noting that the latest refinancings and others completed in February will pare $85 million from the company’s annual interest costs and extend its debt maturities to 2019, save for its credit revolver maturing in 2018.
The rating agency also cited Rite Aid’s "strong market share position as the third-largest U.S. drug retailer" and "management’s concerted efforts to improve the productivity of its store base and manage liquidity," along with working capital reductions and other cost-cutting efforts, despite the company’s high debt load and intense competition from bigger rivals Walgreen Co. and CVS Caremark Corp.
"Rite Aid has maintained liquidity in the $950 million to $1.2 billion range for the past three years," Fitch reported. "Fitch expects free cash flow, net of capital expenditures of $400 million, to be in the $200 million to $250 million range over the next couple of years, which will enable the company to modestly reduce debt overtime or invest a bit more on the wellness [store] remodels. The company has been actively refinancing its debt maturities over the past year, pushing out the next major maturities to 2019."
