Rite Aid to get $1.105 billion term loan, $870 million bonds for Jean Coutu purchase

By Sara Rosenberg

New York, Oct. 10 - Rite Aid Corp. revealed the structure of its debt financing package for the acquisition of Jean Coutu Group USA Inc., including plans for a $1.105 billion senior secured term loan and $870 million in notes, according to a 10-Q filed with the Securities and Exchange Commission Tuesday.

Citigroup is the lead bank on the deals.

The note offering may be increased by $850 million if the Jean Coutu 8½% senior subordinated notes are not assumed, although the current plan is that the notes will be assumed.

At close, Rite Aid intends to draw about $680 million under the new term loan for acquisition financing.

The remaining about $425 million of term loan debt will be borrowed on or around the date that the company file its first post-closing balance sheet with the SEC, with proceeds going towards repaying outstanding revolver borrowings.

Rite Aid plans on amending its existing senior secured credit facility and receivables securitization agreement in connection with the acquisition.

Under the transaction, Longueuil, Quebec-based Jean Coutu Group Inc. will receive $1.45 billion in cash, subject to customary working capital adjustments, and 250 million shares of Rite Aid common stock, giving it a 32% common equity interest and 30.2% of the voting power in the expanded Rite Aid.

The Jean Coutu Group USA includes 1,858 drugstores, of which 337 are Brooks stores and 1,521 are Eckerd stores, and six distribution centers.

At close, Rite Aid's total leverage ratio will be around 6 times, up from a current ratio of 4.6 times. This leverage ratio is expected to drop to 5.4 times after 12 months and drop further to 4.4 times after another 12 months.

The Jean Coutu Group plans on fully repaying its term loan A, term loan B and revolver, and plans on retiring its $350 million of 7 5/8% senior unsecured notes using proceeds from the merger agreement.

Closing of the transaction, which could be as early as Rite Aid's fiscal 2007 fourth quarter that begins Dec. 3 and ends March 3, 2007 and The Jean Coutu Group's fiscal 2007 third quarter that begins on Nov. 26 and ends Feb. 24, 2007, is subject to review under the Hart-Scott-Rodino Act, Rite Aid stockholder approval and other customary closing conditions.

Rite Aid is a Camp Hill, Pa., national drugstore chain.

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