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Duane Reade wraps up debt refinancing
August 10th, 2009
NEW YORK – Duane Reade has completed financing that included a $125 million private equity investment and the buyback of approximately $350 million of debt.
Duane Reade Holdings Inc. said subsidiaries Duane Reade Inc. and Duane Reade on Friday closed an offering of $300 million of 11.75% senior secured notes due August 1, 2015. The holding company announced the offering in early July.
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 2010 and $143.3 million of their 9.75% senior subordinated notes due 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," Duane Reade president and chief executive officer John Lederer said in a statement.
In reporting second-quarter results late last month, Duane Reade said the company's total debt dropped to $554.5 million as of the quarter's end on June 27, a decrease of $1.1 million from the balance at the end of fiscal 2008. The drug store chain also said availability under its revolving credit facility was roughly $67.5 million at the close of the quarter.
Duane Reade posted a smaller net loss in the second quarter as well as gains in operating income and adjusted FIFO EBITDA (earnings before interest, taxes, depreciation, amortization and other charges and credits). It also saw total sales climb 6.1% and same-store sales rise 1.7% in the period.
However, in its outlook for the rest of 2009, the company trimmed its projected retail store sales to $1.760 billion to $1.785 billion, down from an earlier $1.795 billion to $1.830 billion, and reduced its estimated same-store sales gain to 0.5% to 2.2%, compared with the previous guidance of 1% to 2.6%. The retailer also raised its projected net loss to $50.5 million to $55.5 million from its earlier forecast of $47 million to $52 million.