S&P lowers Rite Aid notes to B+, rates new notes B+, loan BB-

Standard & Poor's said it assigned a BB- rating with a recovery rating of 1 to Rite Aid Corp.'s proposed $350 million tranche 3 term loan due 2014, assigned a B+ rating with a recovery rating of 2 to its proposed $425 million senior secured notes due 2016 and lowered the existing senior secured notes to B+ with a recovery rating of 2 from BB- with a recovery rating of 1. All other ratings, including the B corporate credit rating, were affirmed.

The outlook is negative.

The agency said the downgrade of the existing notes is due to the greater amount of first-lien debt from the addition of the term loan in the capital structure, reducing recovery prospects for the senior secured notes, which are secured by a second-lien security interest on the assets securing the company's credit facilities.

The negative outlook reflects S&P's concern that the weakening U.S. economy and intense competition could pressure the performance at Rite Aid's core stores and make it more challenging to successfully integrate the recently acquired stores.

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