Inside This Issue - News
Rite Aid wraps up $225 million loan deal
March 16th, 2009
CAMP HILL, Pa. – Rite Aid Corp. has completed a $225 million loan that makes up for decreased borrowing availability under a key financing agreement renewed earlier this year.
The drug store chain said the accounts receivable securitization term loan, led by Citigroup Inc., is $25 million more than previously announced.
According to a filing with the Securities and Exchange Commission, Rite Aid on January 22 extended an expiring $650 million accounts receivable financing agreement for a 364-day period, which ends in January 2010. Yet the borrowing availability under the renewal was set to drop by $100 million as of January 22 and by another $100 million as of February 20.
Rite Aid stated in the SEC filing that it had replaced that borrowing capacity by arranging for a loan, led by Citigroup, of up to $200 million, half of which had been committed at that time. However, in completing the loan on February 18, the retailer obtained a total of $225 million in financing.
Rite Aid said it will have access to $345 million under the extended financing agreement and, if it is not renewed upon its expiration in January 2010, the company has access to a backstop facility until September 2010.
In the January SEC filing, Rite Aid said its cash flow from operations, financing arrangements and other sources of liquidity “will be adequate to meet its requirements for working capital, debt service and capital expenditures for the foreseeable future.”
The company also cited liquidity from its current level of operations, expected improvements in operating performance, shareholder approval of a reverse stock split and business opportunities from acquired Brooks Eckerd Pharmacy stores.
Major ratings agencies recently had questioned Rite Aid’s liquidity. In late January Moody’s Investors Service downgraded the drug chain’s debt rating, which was already well below investment grade, to Caa2 from Caa1, and gave a negative outlook. Fitch Ratings also listed Rite Aid among eight retailers with “weak” liquidity positions in a January 23 report on liquidity in the United States retail and consumer products sector.
Rite Aid has struggled during the integration of the Brooks Eckerd stores and amid stiffening competition. In its most recent quarterly report, the company increased its projected loss for the 2009 fiscal year. Its stock price has plunged as well, falling below $1 per share last year and hovering around 25 cents in recent weeks.
Rite Aid also recently sold 12 stores to Walgreen Co. and announced plans to close a distribution center in Bohemia, N.Y.