Duane Reade Holdings Inc. has refinanced nearly $350 million of debt through a notes offering and a private equity investment.


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Duane Reade completes refinancing plan

August 17th, 2009

NEW YORK – Duane Reade Holdings Inc. has refinanced nearly $350 million of debt through a notes offering and a private equity investment.

The holding company for the drug store chain said earlier this month that subsidiaries Duane Reade Inc. and Duane Reade closed an offering of $300 million of 11.75% senior secured notes due on August 1, 2015.

The initial offering was announced in early July, and later in the month the company amended the terms and extended the deadline.

The subsidiaries used the proceeds from the offering — along with part of a $125 million preferred equity investment by entities associated with parent Oak Hill Capital Partners — to buy about $205 million of their senior secured floating rate notes due in 2010 and $143.3 million of their 9.75% senior subordinated notes due in 2011, as well as to optionally redeem about $5 million of floating rate notes not tendered in the offering.

“We are very pleased to complete this financing, which reduces our leverage, improves our financial flexibility and provides long-term capital support for the continued transformation of Duane Reade,” president and chief executive officer John Lederer said in a statement.

Pointing to the refinancing plan, Moody’s Investors Services affirmed its credit rating for Duane Reade in early August. Although the company’s ratings remained classified as high-risk, Moody’s upheld its stable outlook for the retailer.

“The stable outlook reflects Moody’s view that Duane Reade’s asset-based revolving credit facility and expected cash flow should provide sufficient liquidity over the near to intermediate term to meet all of the company’s internal requirements,” Moody’s stated.

Duane Reade reported that, as of the end of its second quarter on June 27, its total debt decreased to $554.5 million, down $1.1 million from the balance at the end of fiscal 2008.
The metropolitan New York chain also said that availability under its revolving credit facility was about $67.5 million at the close of the quarter.

During the second quarter, the retailer posted sales gains and improvements in earnings.

 

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