Rite Aid ends Q3 with $1.2 billion liquidity, will address 2014 term loan early next year

By Paul Deckelman

New York, Dec. 20 - Rite Aid Corp. completed its 2013 fiscal third quarter with $1.2 billion of liquidity, including virtually all of the availability under its senior secured revolving credit line.

And the Camp Hill, Pa.-based No. 3 U.S. drugstore chain operator's chief financial officer said that the company will address what it plans to do about a tranche of term loan debt due in June 2014 once the new year begins.

CFO Frank G. Vitrano, who is also the company's senior executive vice president, told investors and analysts on the conference call following Thursday's release of results for the fiscal quarter ended Dec. 1 that Rite Aid had $1.2 billion of liquidity at the quarter's end, including $1.075 billion available under the secured $1.175 billion revolver.

The company had no outstanding borrowings, although availability was reduced by $118 million of outstanding letters of credit. Rite Aid's liquidity also included $167 million of invested cash.

The company's total quarter-end debt stood at $6.152 billion, down from $6.311 billion a year earlier. Its net debt was $5.985 billion, a $325 million improvement from $6.31 billion, driven by both the decline in overall debt and the increase in its invested cash balance from just $1.2 million in the year-earlier period.

The reduction in net debt, in turn, helped to drive a decline in the company's leverage ratio of debt versus last 12-month adjusted EBITDA to 5.6 times from 7.1 times in the year-ago quarter. The leverage ratio improvement was also due in part to an increase in adjusted EBITDA to $295.2 million in the latest quarter from $221.4 million a year earlier.

Rite Aid - a chronic money-loser - also posted its first quarterly profit since the first quarter of 2008, taking in $61.8 million, or 7 cents per diluted share, versus a net loss of $51.9 million, or 6 cents per share, a year earlier.

During the question-and-answer portion of the conference call following the formal presentations by Vitrano, Rite Aid's chairman, president and chief executive officer, John T. Standley, and its chief operating officer, Kenneth A. Martindale, the CFO told an analyst that "one item that we're clearly focused on" is the $1.04 billion of outstanding tranche 2 term loan debt that comes due in June 2014.

He reiterated Rite Aid's previously expressed plans to "look to address [the term loan] in the first calendar quarter of next year."

Vitrano also said, "We continue to look at the other tranches of debt that are out there," particularly its several series of first- and second-lien bonds.

According to Rite Aid's most recent 10-Q filing with the Securities and Exchange Commission from October, as of the end of the 2013 fiscal second quarter on Sept.1, Rite Aid had some $2.272 billion of such senior secured bonds outstanding in five tranches.

These were its $405.95 billion of 9¾% first-lien notes due 2016, its $650 million of 8% first-lien notes due 2020, its $448.343 million of 10 3/8% second-lien notes due 2016, its $500 million of 7½% second-lien notes due 2017 and its $268.533 million of 10¼% second-line notes due 2019.

Vitrano said: "The issue for us is whether it makes more financial sense to wait until the next call, which would be in the middle of next year, or do something now," which he indicated would depend upon market conditions.

"It's something that we continue to monitor and we'll pull the trigger as is appropriate."

He also declared, "Obviously, we do have access to the capital markets, and can react pretty quickly, if the time is right."

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