Yesterday, the U.S.-based drugstore chain retailer,
Rite Aid Corporation
) declared the completion of its debt refinancing activity
announced on Jun 18. Under the refinancing activity, the company
offered senior notes of $810 million, carrying a coupon rate of
6.75% and maturing in 2021.
The proceeds from this offering, along with its existing cash
and borrowings will be utilized to redeem an equivalent amount of
senior notes bearing an interest rate of 9.5% due in 2017.
As part of the offer, the company needs to have consent for
amendments in the senior notes. As of Jul 1, Rite Aid received
consent for approximately $739.6 million out of $810 million of
9.5% notes. The company announced its completion of purchase of
these notes yesterday. Further, the tender offer is open until
the midnight of Jul 16 for the remaining notes, unless extended
or terminated earlier.
Apart from this, Rite Aid notified its intention to redeem all
the notes bearing a coupon rate of 9.5%. The redemption of these
notes will occur on Aug 1, at a price of 103.167% of the face
value. In addition, holders of these notes will get accrued and
unpaid interest, if there are any.
As per the company's previous announcement, the fees, expenses
and charges related to refinancing transactions will weigh upon
its financial results - including net income and earnings per
At the end of fiscal 2013, this Zacks Rank #3 (Hold) company
had $665.0 million borrowing outstanding under its senior credit
facility and $115 million of outstanding letters of credit.
Rite Aid, which trails
CVS Caremark Corp
) in terms of store count, has been consistently focusing on debt
refinancing to lower its interest expenses and extend the
maturity period. In early June, the company made a similar debt
refinancing transaction involving a cash tender offer to redeem
all of its 7.5% Senior Secured Notes worth $500 million with
proceeds from a new $500 million second-lien term loan, along
with available cash and borrowings.
Another company that recently indulged in refinancing
Avis Budget Group Inc
), a leading global car rental enterprise. As part of the
transaction, this company increased its term loan facility to $1
billion from the existing $900 million, for a lower rate of
interest. However, the new term loan borrowing, like the existing
facility matures in 2019.
We believe the act of lowering interest rate on the existing
loan facility and redeeming high-cost debt will enable companies
to reduce corporate interest expenses, and provide them financial
AVIS BUDGET GRP (CAR): Free Stock Analysis
CVS CAREMARK CP (CVS): Free Stock Analysis
RITE AID CORP (RAD): Free Stock Analysis
WALGREEN CO (WAG): Free Stock Analysis Report
To read this article on Zacks.com click here.