Fitch ups Rite Aid notes to B+/RR3

Fitch Ratings said it affirmed its ratings on Rite Aid Corp., including its issuer default rating at B and upgraded its guaranteed senior unsecured notes to B+/RR3 from B/RR4.

The outlook was revised to positive from stable.

Fitch said the ratings reflect the improvement in Rite Aid’s operating performance, credit metrics and liquidity profile over the past 24 months. The company’s EBITDA increased to $1.3 billion in fiscal 2014 (year ended February 2014), after surpassing the $1 billion level for the first time in fiscal 2013.

The agency expects EBITDA to be sustainable at $1.3 billion over the intermediate-term, enabling the company to dedicate increased capex toward store remodels and some store relocation activity, as well devote free cash flow to debt reduction. Fitch also expects adjusted leverage to trend towards the mid-5 times range over the next 24 months versus 5.9 times currently and 6.6 times in fiscal 2013.

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