Rite Aid 2014 Annual Report Download - page 35

Liquidity and Capital Resources
General
We have two primary sources of liquidity: (i) cash provided by operating activities and
(ii) borrowings under the revolving credit facility of our senior secured credit facility. Our principal uses
of cash are to provide working capital for operations, to service our obligations to pay interest and
principal on debt and to fund capital expenditures. Total liquidity as of March 1, 2014 was
$1,317.6 million, which consisted of revolver borrowing capacity of $1,315.1 million and invested cash of
$2.5 million.
Credit Facility
Our senior secured credit facility consists of a $1.795 billion revolving credit facility and a
$1.152 billion Tranche 7 Term Loan. Borrowings under the revolving credit facility bear interest at a
rate per annum between LIBOR plus 2.25% and LIBOR plus 2.75%, if we choose to make LIBOR
borrowings, or between Citibank’s base rate plus 1.25% and Citibank’s base rate plus 1.75% in each
case based upon the amount of revolver availability as defined in the senior secured credit facility. We
are required to pay fees between 0.375% and 0.50% per annum on the daily unused amount of the
revolver, depending on the amount of revolver availability. Amounts drawn under the revolver become
due and payable on February 21, 2018.
Our ability to borrow under the revolver is based upon a specified borrowing base consisting of
accounts receivable, inventory and prescription files. At March 1, 2014, we had $400.0 million of
borrowings outstanding under the revolver and had letters of credit outstanding against the revolver of
$79.9 million, which resulted in additional borrowing capacity of $1,315.1 million.
On March 14, 2014, we amended and restated our credit agreement governing our senior secured
credit facility, pursuant to which we prepaid our outstanding Tranche 6 Term Loan with the proceeds of
a new $1.152 billion Tranche 7 Term Loan. The $1.152 billion Tranche 7 Term Loan matures on
February 21, 2020 and currently bears interest at a rate per annum equal to LIBOR plus 2.75% with a
LIBOR floor of 0.75%, if we choose to make LIBOR borrowings, or at Citibank’s base rate plus
1.75%. We must make mandatory prepayments of the Tranche 7 Term Loan with the proceeds of
certain asset dispositions and casualty events (subject to certain limitations), and with the proceeds of
certain issuances of debt (subject to certain exceptions). If at any time there is a shortfall in our
borrowing base under our senior secured credit facility, prepayment of the Tranche 7 Term Loan may
also be required.
The senior secured credit facility restricts us and the subsidiary guarantors from accumulating cash
on hand in excess of $200.0 million at any time when revolving loans are outstanding (not including
cash located in our store deposit accounts, cash necessary to cover our current liabilities and certain
other exceptions) and from accumulating cash on hand with revolver borrowings in excess of
$100.0 million over three consecutive business days. The senior secured credit facility also states that if
at any time (other than following the exercise of remedies or acceleration of any senior obligations or
second priority debt and receipt of a triggering notice by the senior collateral agent from a
representative of the senior obligations or the second priority debt) either (a) an event of default exists
under our senior secured credit facility or (b) the sum of revolver availability under our senior secured
credit facility and certain amounts held on deposit with the senior collateral agent in a concentration
account is less than $100.0 million for three consecutive business days (a ‘‘cash sweep period’’), the
funds in our deposit accounts will be swept to a concentration account with the senior collateral agent
and will be applied first to repay outstanding revolving loans under the senior secured credit facility,
and then held as collateral for the senior obligations until such cash sweep period is rescinded pursuant
to the terms of our senior secured credit facility.
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