Fitch rates Rite Aid convertibles CCC

Fitch Ratings said it assigned CCC/RR6 ratings to Rite Aid Corp.'s $150 million 8.5% senior unsecured convertible notes due 2015.

The company's other ratings remain unchanged, including the B- issuer default rating, BB-/RR1 $1.75 billion bank credit facility and $1.25 billion term loans, BB-/RR1 $1.06 billion second-lien senior secured notes, CCC+/RR6 $1.85 billion guaranteed senior unsecured notes and CCC/RR6 $758 million non-guaranteed senior unsecured notes.

The outlook is stable.

The proceeds of the new offering will be used to redeem the company's $150 million 6 1/8% senior unsecured notes due 2008 at 102% of par.

The agency said the ratings consider the risk associated with integrating over 1,800 Brooks and Eckerd stores with Rite Aid's existing store base and improving operations at these stores; the company's high leverage, with a total adjusted debt-to-EBITDAR ratio of 8.1 times for the fiscal year ended March 1; operating statistics that trail those of competitors; and the intense competition in the drug retailing sector.

The ratings also reflect Rite Aid's management's concerted efforts to improve the productivity of its store base, the positive demographics of the drug retailing industry and benefits from leveraging a larger store base, Fitch said.

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