Citi, BofA Shop First Lien For Rite Aid, Bonds Wait In The Wings
June 19, 2008
Citigroup and Bank of America are marketing a $350 million first-lien term loan for drugstore chain Rite Aid. Price talk is at Libor plus 225, with an OID of 94.
The proceeds from the term loan, in addition to $1.22 billion in bonds, will help fund the acquisition of the Eckerd and Brooks pharmacy chains from the Jean Coutu Group and pay down a portion of the company’s outstanding senior secured notes.
On June 12, Moody’s Investors Service assigned a Ba3 rating to the first lien, which reflects Rite Aid’s weak credit metrics and cash flow, the analysts said.
The next day, Standard & Poor’s assigned a BB- rating to the first lien, citing the company’s weak cash flow, the challenges it faces integrating the 1,800 acquired stores from the Eckerd and Brooks chains, and the overall operating pressure it faces in a competitive industry.
S&P forecasts Rite Aid’s total debt to Ebitda at 8.0x for 2008, up from 7.2x in 2007. Rite Aid, headquartered in Camp Hill, Pa., is the third-largest domestic drugstore chain, with 5,059 stores in 31 states.
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