Rite Aid breaks; Western Refining term loan rises as stock, convertibles offerings increased

By Sara Rosenberg

New York, June 5 - Rite Aid Corp.'s term loan allocated and freed up for trading on Friday, with levels seen a couple of points higher than the original issue discount at which the debt was sold during syndication.

In other news, Western Refining Inc.'s term loan gained a little bit of ground during market hours as investors are expecting a larger paydown as a result of the company's common stock offering and convertibles issuance being upsized.

Rite Aid frees to trade

Rite Aid's $525 million term loan due 2015 (B3/B+) hit the secondary market and the debt traded well above its original issue discount price, according to a trader.

The term loan was quoted at 99¼ bid, 99¾ offered on the break and then it was later seen at 99 3/8 bid, 99 7/8 offered, the trader said.

Pricing on the loan is Libor plus 650 basis points with a 3% Libor floor, and it was sold at an original issue discount of 96.

There is call protection of 105 in year one, 103 in year two and 101 in year three.

During syndication, the loan was upsized from $400 million as a result of strong demand and the original issue discount firmed at the midpoint of guidance of 95½ to 961/2.

Rite Aid refinancing loan

Proceeds from Rite Aid's new term loan are being used to refinance the company's $145 million term loan tranche 1 due 2010, and repay and cancel a portion of the commitments outstanding under its revolver.

Citigroup, Bank of America, Wells Fargo and GE Capital are the joint lead arrangers on the new deal, with Citi the left lead.

In connection with the term loan, Rite Aid is also amending its existing credit facility to allow for the new debt and the completion of a refinancing plan, of which the term loan is a part.

The company is looking to refinance its September 2010 debt maturities, including its accounts receivable securitization programs.

Funds for the refinancing are targeted to come from a combination of a new revolver, new term loans, the issuance of high-yield notes, which may be secured on a first- or second-priority basis or unsecured, or the entry into a new securitization program.

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

Western Refining trades up

Western Refining's term loan inched its way higher during a quiet trading session following the company's announcement that it upsized both its common stock and convertibles offerings, according to a trader.

The term loan was quoted at 97¼ bid, 98¼ offered, up from Thursday's levels of 97 bid, 98 offered, the trader said.

On Friday morning, Western Refining revealed that it will be selling 20 million shares of common stock, up from the previously announced size of 14 million shares, and priced the offering at $9.00 per share.

In addition, the company said that it increased its 5.75% convertible senior notes offering to $200 million from $100 million.

Proceeds from both of these offerings, along with proceeds from a $600 million offering of senior secured notes for which the books closed on Friday, are being used to repay term loan borrowings.

As of March 31, there was roughly $1.28 billion outstanding under the term loan.

Western Refining amends

As was previously reported, Western Refining recently amended its credit facility so that financial covenants will change if the term loan is reduced to a size of $800 million or less, and to allow for the issuance of the senior secured notes and convertible senior notes.

If the company reduces the amount of its term loan to $800 million on or before Sept. 30, 2010, then the minimum consolidated interest coverage ratio will be 2.00 to 1.00 and the maximum consolidated leverage ratio will be 4.50 to 1.00 through Sept. 30, 2010, and as of Dec. 31, 2010 and thereafter, the minimum consolidated interest coverage ratio will be 2.50 to 1.00 and the maximum consolidated leverage ratio will be 4.00 to 1.00.

If the term loan is reduced to $800 million after Sept. 30, 2010, the minimum consolidated interest coverage ratio will be 2.50 to 1.00 and the maximum consolidated leverage ratio will be 4.00 to 1.00 thereafter.

The amendment also eliminates the maximum consolidated senior leverage ratio when the term loan is reduced to $800 million.

Western Refining term spread changing

In addition, under Western Refining's amendment, once the term loan is $800 million or less, the spread will be set at Libor plus 600 bps with a 3.25% Libor floor.

The amendment was completed on May 29.

Revolver lenders received a 25 bps amendment fee.

Bank of America is the administrative agent on the deal.

Western Refining is an El Paso, Texas-based refining and marketing company.

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