Moody's rates Rite Aid loan B3

Moody's Investors Service said it assigned a B3 (LGD2, 27%) rating to Rite Aid Corp.'s proposed $400 million term loan due 2015 and affirmed its other ratings, including the Caa2 corporate family and probability-of-default ratings, B3 (LGD2, 27%) first-lien bank facilities, Caa2 (LGD4, 55%) second-lien secured notes, Caa3 (LGD5, 79%) guaranteed senior notes, Ca (LGD6, 95%) senior notes and debentures and SGL-4 speculative-grade liquidity rating.

The outlook remains negative.

The proceeds from the proposed term loan will be used to repay Rite Aid's $145 million term loan that matures in September 2010 and to repay and reduce the amount of commitments under its $1.75 billion assets-based revolving credit facility.

The agency said the Caa2 corporate family rating reflects Rite Aid's highly leveraged capital structure - the debt-to-EBITDA ratio is currently about 9.6 times - which Moody's believes is unsustainable over the medium term at the company's current level of operating performance.

Positive ratings consideration is given to the company's recent working capital improvements, the solid fundamentals of the prescription drug industry and large revenue base, Moody's said.

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