S&P rates Rite Aid loan B+

Standard & Poor's said it assigned a B+ issue rating and 1 recovery rating to Rite Aid Corp.'s proposed $400 million tranche 4 term loan due 2015 and affirmed the B- corporate credit rating.

The outlook remains negative.

Proceeds from the term loan will be used to repay the $145 million tranche 1 term loan maturing September 2010 and reduce borrowings outstanding under its revolver credit facility.

The ratings reflect the challenges Rite Aid faces in improving both the operating performance of the 1,800 acquired Eckerd stores and overall operations amid intense industry competition, the agency said, adding that they also reflect the company's significant debt burden and thin cash flow protection.

At the same time, S&P expects Rite Aid's initiatives to lower capital spending, reduce working capital and cut costs to partially offset potential negative effects of a slowdown in sales growth in 2009, resulting in positive free cash flow.

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