Fitch cuts Rite Aid notes to CCC+

Fitch Ratings said it downgraded Rite Aid Corp.'s senior unsecured notes to CCC+ from B- and the notes' recovery rating to 5 from 4.

The B- issuer default rating, BB- $1.75 billion secured bank credit facility with a recovery rating of 1 and BB- secured notes with a recovery rating of 1 were affirmed. The outlook is stable.

The downgrade of the senior unsecured notes reflects Fitch's recovery analysis of Rite Aid's capital structure, which resulted in below-average recovery for the senior unsecured note holders given default.

Fitch said the ratings are supported by Rite Aid's strategy to focus on its stores and customer service levels, its adequate liquidity and the positive demographics of the drug retailing industry.

The ratings are constrained by Rite Aid's financial leverage, operating statistics that trail its largest competitors and the highly competitive nature of the drug retailing business, the agency said.

While Rite Aid has been able to reduce debt over time, debt balances remain high at $3.1 billion on Nov. 26. For the 12 months ended Nov. 5, Rite Aid's adjusted leverage was 6.2x and EBITDAR coverage of interest and rent was 1.5x.

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