Moody's revises Rite Aid review to uncertain

Moody's Investors Service said it revised the review of Rite Aid's B2 corporate family rating to direction uncertain from on review for upgrade following news that the company mutually agreed with Walgreens Boots Alliance to terminate the previous agreement under which Walgreens was to acquire all outstanding shares of Rite Aid.

The company has entered into a new agreement with Walgreens to sell 2,186 Rite Aid stores and related assets for $5.175 billion, Moody's explained.

Rite Aid will also receive $325 million termination fees, the agency added.

Although Moody's said it expects the company to repay a significant amount of debt from the proceeds of the transaction, the lack of information on the actual amount of debt repayment and the operating performance of the remaining stores, including their EBITDA, prevents the agency from concluding the review at this time.

The weak operating performance of the company in the last 12 months and its smaller scale after the asset sales puts the company in a weak competitive position, Moody's added.

Also on review with direction uncertain is the company's probability of default rating of B2-PD, senior secured bank credit facility rating of B2 (LGD 3), senior unsecured regular bond/debenture rating of B3 (LGD 5) and senior unsecured regular bond/debenture rating of Caa1 (LGD 6).

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