S&P drops Rite Aid to SD

S&P said it cut Rite Aid Corp.’s issuer rating to SD from CC and the ratings on the issuer’s notes due 2025, 2027 and 2028, to D from CC. The ratings on the company's notes not subject to the repurchase transactions are unchanged.

The downgrade follows Rite Aid reporting it completed a below-par cash tender offer for about $194 million in total principal of $114.9 million of 7˝% senior secured notes due 2025, $51.7 million of the unguaranteed 7.7% unsecured notes due 2027, and $26.9 million of the 6 7/8% notes due 2028, the agency said.

“We view the proposed transaction as distressed because we do not view that discount as minimal and the company does not have significant excess cash reserves on its balance sheet to fund the tender without incurring additional debt,” S&P said in a press release.

“The exchange offer will slightly reduce the company's funded debt and alleviate some of its interest expense. However, it will only marginally benefit Rite Aid's credit profile. Therefore, we expect to raise our issuer credit rating on the company to CCC+ from SD in the next few days given the persistent weakness in its business,” the agency said.

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