Rite Aid new term loan dips on bond offering, proposed revolver filling up; LCDX softens

By Sara Rosenberg

New York, June 8 - Rite Aid Corp.'s new term loan slipped a little lower in trading on Monday as the company announced that it is going forward with a bond offering, while on the primary side, the company revealed that its proposed senior secured revolving credit facility is nearly fully syndicated.

In other trading happenings, the LCDX 12 index posted some losses, while stocks were more of a mixed bag.

Rite Aid term loan slides

Rite Aid's new $525 million term loan (B3/B+) was a touch weaker in the secondary market as news emerged that the company would be selling $400 million of senior secured notes due 2016, a trader told Prospect News.

The term loan was quoted at 99¼ bid, 99¾ offered, down from Friday's closing levels of 99 3/8 bid, 99 7/8 offered, the trader said.

The loan had first freed up for trading on Friday at 99¼ bid, 99¾ offered, but had moved up by an eighth of a point before the day ended.

According to the trader, the term loan softened on the bond news on Monday because investors who received small term loan allocations may have been looking to sell their positions so they could get involved in the new notes.

Rite Aid term loan details

As was previously reported, Rite Aid's new term loan (B3/B+) is priced at Libor plus 650 basis points with a 3% Libor floor, and it was sold at an original issue discount of 96.

There is call protection of 105 in year one, 103 in year two and 101 in year three.

During syndication, the loan was upsized from $400 million as a result of strong demand and the original issue discount firmed at the midpoint of guidance of 95½ to 961/2.

Citigroup, Bank of America, Wells Fargo and GE Capital are the joint lead arrangers on the new deal, with Citi the left lead.

Proceeds from the new term loan, which is scheduled to close on June 10, will be used to refinance the $145 million tranche 1 term loan also due September 2010, and repay and cancel a portion of the commitments outstanding under the existing $1.75 billion revolver due September 2010.

Rite Aid marketing revolver

As part of the plan to refinance 2010 debt maturities, Rite Aid is also seeking a new $1 billion senior secured revolving credit facility due September 2012, according to an 8-K filed with the Securities and Exchange Commission on Monday.

The company revealed that, so far, it has received $900 million in commitments from lenders towards the revolver.

If the new revolver is in an amount less than $1 billion, Rite Aid may seek to offer additional notes or other debt.

Proceeds from the new revolver and the new notes will also be used to repay amounts outstanding and replace the company's existing revolver.

The notes offering is not contingent upon the entry into the new revolver, which is subject to successful syndication and satisfaction of customary closing conditions.

Rite Aid amends

On June 5, Rite Aid successfully amended its existing credit facility to allow for the new debt and the completion of the refinancing plan, and to provide greater flexibility to complete asset sales.

The amendment also permits the company to refinance its existing accounts receivable securitization facilities with on-balance sheet debt secured on a senior or second priority basis.

Under the amendment, if the company has than $150 million of revolver availability, it will be subject to a fixed-charge coverage ratio maintenance test.

In addition, the amendment restricts Rite Aid from accumulating cash on hand in excess of $200 million at any time when revolving loans are outstanding and from borrowing revolving loans in excess of $100 million over three consecutive business days.

Rite Aid is a Camp Hill, Pa.-based drugstore chain.

LCDX heads lower

Moving back to the secondary market, the LCDX 12 index was softer on the day, but stocks were mixed, according to a trader.

The index was quoted at 86.90 bid, 87.30 bid, down from Friday's levels of 87.25 bid, 87.65 offered, the trader said.

As for equities, Nasdaq closed down 7.02 points, or 0.38%, Dow Jones Industrial Average closed up 1.36 points, or 0.02%, S&P 500 closed down 0.95 points, or 0.1%, and NYSE closed down 14.08 points, or 0.23%.

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