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CAMP HILL, Pa. — Rite Aid Corp. has issued $650 million in notes as part of a plan to refinance its debt and credit.
The drug store chain also is working to regain compliance with the minimum share price rule of the New York Stock Exchange (NYSE) in order to avoid being delisted.
Plans call for the proceeds of the $650 million in senior secured notes, which are due in 2020, to be used along with available cash to repay and retire a $648 million term loan that’s due in 2015 under Rite Aid’s senior secured credit facility, as well as to fund related fees and expenses.
Rite Aid also has replaced its existing $1.175 billion revolving credit facility due in 2012 with a new $1.175 billion revolver due in 2015.
The day after Rite Aid announced its debt refinancing plan, Fitch Ratings assigned a BB-/RR1 rating to the senior secured notes, indicating a speculative-grade debt issue, and a “stable” rating outlook.
“The rating reflects Rite Aid’s significant high leverage and limited capital for investment and operating statistics that significantly trail its two major competitors,” Fitch stated. “The rating also reflects 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 through working capital reductions and other cost-cutting initiatives.”
Earlier this month Rite Aid said it had been informed by NYSE that its common stock price had fallen below the minimum required to remain on the exchange. The average closing price of a company’s stock must be at least $1 per share over a consecutive 30-trading-day period to stay listed.
Rite Aid reported that it was notified of noncompliance on July 30. On that day the company’s shares closed at 99 cents. The stock dipped below $1 on June 30, closing at 98 cents per share. During that time span shares ranged from a low of 88 cents to a high of 99 cents. At presstime Rite Aid’s shares were hovering around 96 cents.
Rite Aid said that it has six months from the receipt of the notice to regain compliance or until the company’s next annual shareholder meeting in June 2011, if stockholder approval is required to remedy the price shortfall through a move such as a reverse stock split.
Under NYSE rules Rite Aid can regain compliance during the cure period by having an average closing share price of at least $1 for a 30-day trading period ending on the last day of a calendar month and at least a $1-per-share price on the last day of that month or the last day of the cure period.
Rite Aid notes that on July 27 its board approved a reverse split of the company’s common stock — subject to shareholder approval — if such a split is deemed necessary to cure the price deficiency.
Last summer Rite Aid canceled a reverse stock split after it had regained compliance with NYSE’s minimum share price listing rule.
The company’s shares had fallen below $1 in September 2008, and in December 2008 its board and shareholders had approved a plan for a reverse stock split.
But the severe market downturn, which pushed many listed companies out of compliance with the $1 rule, prompted NYSE in February 2009 to delay applying its stock price criteria until the end of June 2009, which gave Rite Aid more time to regain compliance and led its board to postpone the stock split.
