Duane Reade obtains needed consents for floaters, 9¾% notes

By Jennifer Chiou

New York, July 31 - Duane Reade Holdings, Inc. announced the receipt of the necessary consents to amend the fixed-price cash offers by its wholly owned subsidiaries, Duane Reade Inc. and Duane Reade, to purchase its $210 million of senior secured floating-rate notes due 2010 and its $195 million of 9¾% senior subordinated notes due 2011.

The consent deadline was 11:59 p.m. ET on July 30.

As of that time, holders of 97.6% of the floaters and 73.5% of the 9¾% notes delivered consent.

The companies have executed supplemental indentures.

Prior changes remove the minimum tender and consent conditions in the offer for the floaters, add a condition that Duane Reade must execute and amendment to its asset-based revolver, which will, among other things, allow the issuance of new senior secured notes, reduce the amount of 9¾% notes to be bought in the offer to $146.25 million from all $195 million previously, reduce the minimum tender condition for the 9¾% notes to 60% from 85% and cut the tender payment for the 9¾% notes to $835 per $1,000 principal amount from $845 but increase the consent payment to $40.00 from $30.00.

The offers will expire on Aug. 6.

Previously, the consent deadline was 11:59 p.m. ET on July 21 and the expiration was 11:59 p.m. ET on Aug. 4.

Duane Reade announced on July 9 that it was tendering for the notes and also soliciting consents to amend the note indentures to remove substantially all of the restrictive covenants and, in the case of the floaters, release all of the collateral securing the notes.

For each $1,000 principal amount, the companies said that they will pay par for the floaters and $875 for the 9¾% notes, with both including a $30 consent payment for those who tender by the early deadline, amounts now amended in the case of the 9¾% notes.

Now, the offer is conditioned upon, among other things, (i) the funding of a $125 million preferred equity investment by Oak Hill Capital Partners, LP associates, (ii) the receipt of sufficient proceeds from offerings of new senior secured notes and new senior subordinated notes, (iii) at least 90% of the floaters having been validly tendered (a condition now removed), (iv) at least 60% of the 9¾% notes having been validly tendered (another condition now removed) and (v) receipt of the required consents.

Goldman, Sachs & Co. (800 828-3182 or call collect 212 357-4692) and Banc of America Securities LLC (888 292-0070 or call collect 980 388-9217) are the dealer managers. The information agent is Global Bondholder Services Corp. (866 470-3800 or call collect 212 430-3774).

Duane Reade is the largest drugstore chain in New York.

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