New Issue: Rite-Aid upsizes to $1 billion; secured notes yield 7½%, seniors 8 5/8%; both priced at par

By Paul A. Harris

St. Louis, Feb. 15 - Rite-Aid Corp. upsized its two-part note offering to $1 billion from $800 million and priced both tranches on Thursday, according to an informed source.

The Camp Hill, Pa.-based drugstore chain priced an upsized $500 million tranche of 10-year senior secured second-lien notes (B3/B+/BB-) at par to yield 7½%. The secured notes were upsized from $300 million and priced on top of the price talk.

Meanwhile Rite-Aid priced a $500 million tranche of eight-year senior unsecured notes (Caa2/B-/CCC+) at par to yield 8 5/8%, also on top of price talk.

Citigroup ran the books for the note offering, which has been registered with the Securities and Exchange Commission. Wachovia Securities and Barclays Capital were co-managers.

Proceeds will be used to call $300 million of the company's 9½% senior secured notes due February 2011 at 104.75 and to replenish its $1.75 billion revolving credit facility, which was used to retire all of its $250 million outstanding 4¾% convertible notes due December 2006 and all $185 million of 7 1/8% senior notes due January 2007. Proceeds may also be used for general corporate purposes.

Rite-Aid is acquiring Canadian drug retailer Jean Coutu Group's U.S. operations, including the Brooks and Eckerd chains.

Issuer:	Rite-Aid Corp.
Amount:	$1 billion
Bookrunner:	Citigroup
Co-managers:	Wachovia Securities, Barclays Capital
Trade date:	Feb. 15
Settlement date:	Feb. 21
Distribution:	SEC registered
Secured notes
Amount:	$500 million (upsized from $300 million)
Maturity:	March 1, 2017
Security description:	Senior secured second-lien notes
Coupon:	7½%
Price:	Par
Yield:	7½%
Spread:	279 bps
Call features:	Make-whole call at Treasuries plus 75 bps until March 1, 2012, then at 103.75, 102.50, 101.25, par on and after March 1, 2015
Equity clawback:	Until March 1, 2010 for 35% at 107.50
Ratings:	Moody's: B3
	Standard & Poor's: B+
	Fitch: BB-
Price talk:	7½% area
Senior notes
Amount:	$500 million
Maturity:	March 1, 2015
Coupon:	8 5/8%
Price:	Par
Yield:	8 5/8%
Spread:	392 bps
Call features:	Make-whole call at Treasuries plus 75 bps until March 1, 2011, then at 104.313, 102.157, par on and after March 1, 2013
Equity clawback:	Until March 1, 2010 for 35% at 108.625
Ratings:	Moody's: Caa2
	Standard & Poor's: B-
	Fitch: CCC+
Price talk:	8 5/8% area

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