Rite Aid 2011 Annual Report Download - page 87

RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended February 26, 2011, February 27, 2010 and February 28, 2009
(In thousands, except per share amounts)
10. Indebtedness and Credit Agreement (Continued)
notes due 2020. The 8.625% senior notes due 2015, the 9.375% senior notes due 2015 and the 9.5%
senior notes due 2017 are also guaranteed by all of the same subsidiaries on an unsecured basis.
The subsidiary guarantees related to the Company’s senior secured credit facility and secured notes
and on an unsecured basis the guaranteed indentures are full and unconditional and joint and several,
and there are no restrictions on the ability of the parent to obtain funds from its subsidiaries. Also, the
parent company has no independent assets or operations, and subsidiaries not guaranteeing the credit
facility and applicable indentures are minor. Accordingly, condensed consolidating financial information
for the parent and subsidiaries is not presented.
The indentures that govern the Company’s secured and guaranteed unsecured notes contain
restrictions on the amount of additional secured and unsecured debt that can be incurred by the
Company. As of February 26, 2011, the amount of additional secured and unsecured debt that could be
incurred under these indentures was $1,075,262 (which does not include the ability to enter into certain
sale and leaseback transactions.) However, the Company could not incur any additional secured debt
assuming a fully drawn revolver and the outstanding letters of credit. The ability to issue additional
unsecured debt under these indentures is governed by an interest coverage ratio test.
The Company has an excess cash flow payment requirement under the senior secured credit
facility. Included in these payments above is a repayment of $39.8 million of the Tranche 2 Term Loan
and the Tranche 5 Term Loan, as required under the Company’s senior secured credit facility. This
excess cash flow will be in lieu of scheduled amortization payments for the next three fiscal years.
Other 2011 Transactions
In August 2010, the Company issued $650,000 of 8.00% senior secured notes due August 15, 2020.
These notes are unsecured, unsubordinated obligations of Rite Aid Corporation and rank equally in
right of payment with all other unsubordinated indebtedness. The Company’s obligations under these
notes are guaranteed, subject to certain limitations, by the same subsidiaries that guarantee the
obligations under the senior secured credit facility and the 9.75% senior secured notes due 2016. These
guarantees are shared, on a senior basis, with debt outstanding under the senior secured credit facility
and the 9.75% senior secured notes due 2016. The indenture that governs the 8.00% notes contains
covenant provisions that, among other things, allow the holders of the notes to participate along with
the term loan holders and holders of the 9.75% senior secured notes due 2016 in the mandatory
prepayments resulting from the proceeds of certain asset dispositions (at the option of the noteholder)
and include limitations on the Company’s ability to pay dividends, make investments or other restricted
payments, incur debt, grant liens, sell assets and enter into sale-leaseback transactions.
In July 2010, the Company repurchased $93,812 of its $158,000 outstanding 8.5% convertible notes.
The Company’s remaining 8.5% convertible notes require that the Company maintains a listing on the
NYSE or certain other exchanges. In the event of a NYSE delisting, holders of these notes could
require the Company to repurchase them, which the Company has the ability to do under the terms of
our senior credit facility. On July 30, 2010 the Company received a notice of non-compliance from the
NYSE because the price of its common stock had fallen below the NYSE’s minimum share price rule.
The Company’s common stock continued to trade as usual on the NYSE and on March 1, 2011, the
87