Rite Aid begins tender offer, consent bid for three series of notes

By Angela McDaniels

Tacoma, Wash., Jan. 31 - Rite Aid Corp. began tender offers for its $410 million of 9¾% senior secured notes due 2016, $470 million of 10 3/8% senior secured notes due 2016 and $180,277,000 of 6 7/8% senior debentures due 2013, according to a company news release.

The company is also soliciting consents for amendments that would eliminate or modify some covenants, events of default and other provisions in the indentures governing the notes. Holders who tender their notes will be deemed to consent to the proposed amendments, and holders may not deliver consents without tendering their notes.

The tender offers will expire at midnight ET on Feb. 28.

For each $1,000 principal amount, the company is offering $1,075.00 for the 9¾% notes, $1,058.50 for the 10 3/8% notes and $1,028.75 for the 6 7/8% debentures. Holders will also receive accrued interest up to but excluding the applicable settlement date.

Each of the payments noted includes a $30.00 consent payment for each note tendered by midnight ET on Feb. 13, the consent payment date.

The company has an early settlement option for notes tendered by the consent payment deadline.

Holders of 6 7/8% debentures whose tenders are settled prior to Feb. 15 will be deemed to have consented to giving up any claim to the interest payment due Feb. 15 that they might otherwise have as a result of the record date of Feb. 1 and will receive only the accrued interest described above.

Rite Aid said it plans to redeem any 9¾% notes and 10 3/8% notes not tendered in the offers, and it plans to satisfy and discharge any 6 7/8% debentures that remain outstanding after the tender offer. Holders of 6 7/8% debentures that are satisfied and discharged will continue to receive regular interest payments, and the repayment of their 6 7/8% debentures will be made at maturity on Aug. 15, 2013.

In addition, Rite Aid will redeem on Feb. 25 all of its $6 million principal amount of outstanding 9¼% senior notes due 2013.

The tender offers and consent solicitations are subject to certain conditions. For the 9¾% notes and the 10 3/8% notes, these include the completion of one or more financing transactions resulting in net proceeds to Rite Aid that are enough to pay the total consideration plus accrued interest.

The tender offers are part of a series of debt refinancing transactions that are expected to also include the amendment and restatement of Rite Aid's existing revolving credit facility and the refinancing of its $1.04 billion tranche 2 term loan due 2014 with the proceeds of a new term loan, together with borrowings under the amended revolver.

The tender offers will be funded with the proceeds from new first- and/or second-lien term loans, together with borrowings under the amended revolver and available cash.

Rite Aid said it has not yet determined the amount of the amended revolver or new term loans. The company currently has signed commitments for a $1.5 billion revolver.

Citigroup (800 558-3745 or 212 723-6106) is the dealer manager and solicitation agent for the tender offers. The information agent is Global Bondholder Services Corp. (866 804-2200 or 212 430-3774 for banks and brokers).

Rite Aid is a drugstore chain based in Camp Hill, Pa.

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