Rite Aid announced plans yesterday to offer $250 million in senior secured notes saw its shares fall 1.9 percent to $1.55.
The new $250 million in notes, due 2019, will be unsecured, unsubordinated obligations guaranteed by substantially all of Rite Aid's subsidiaries. The guarantees will be secured on a second lien basis.
The notes offering is part of a comprehensive plan to refinance Rite Aid's first lien accounts receivable securitization facility and second lien accounts receivable securitization facility due September 2010. As of October 16, 2009, there was $475 million outstanding under the securitization facilities.
Rite Aid also said it plans to take other steps to wrap up a refinancing of all of its debt maturing in September 2010.
The company plans to increase borrowing under Rite Aid's existing $525 million senior secured term loan due June 2015 by $125 million to $650 million. Rite Aid also intends to enter into an amendment to its senior secured credit facility which will increase the maximum borrowing capacity under Rite Aid's existing senior secured revolving credit facility from $1.0 billion to $1.175 billion.
Rite Aid intends to use the net proceeds from the offering of the notes, together with the proceeds from the increased term loan and borrowings under the revolving credit facility to repay and cancel Rite Aid's accounts receivable securitization facilities and to fund related fees and expenses. Upon successful completion of the comprehensive plan, Rite Aid will have refinanced all of its September 2010 debt maturities.
Rite Aid's bonds rose in secondary trading. Rite Aid's 9.5 percent bond due 2017 rose 1.5 cents to 84.5 cents on the dollar, according to MarketAxess. The bond has risen from 77.75 cents on October 2.