Rite Aid 2014 Annual Report Download - page 36

The senior secured credit facility allows us to have outstanding, at any time, up to $1.5 billion in
secured second priority debt and unsecured debt in addition to borrowings under the senior secured
credit facility and existing indebtedness, provided that not in excess of $750.0 million of such secured
second priority debt and unsecured debt shall mature or require scheduled payments of principal prior
to May 21, 2020. The senior secured credit facility allows us to incur an unlimited amount of unsecured
debt with a maturity beyond May 21, 2020; however, certain of our other outstanding indebtedness
limits the amount of unsecured debt that can be incurred if certain interest coverage levels are not met
at the time of incurrence of said debt or other exemptions are not available. The senior secured credit
facility also contains certain restrictions on the amount of secured first priority debt we are able to
incur. The senior secured facility also allows, so long as the senior secured credit facility is not in
default and we maintain availability on the revolving credit facility of more than $100.0 million, for the
voluntary repurchase of any debt and the mandatory repurchase of our 8.5% convertible notes due
2015.
Our senior secured credit facility contains covenants which place restrictions on the incurrence of
debt beyond the restrictions described above, the payment of dividends, sale of assets, mergers and
acquisitions and the granting of liens. Our credit facility also has one financial covenant, which is the
maintenance of a fixed charge coverage ratio. The covenant requires that, if availability on the
revolving credit facility is less than $150.0 million, we maintain a minimum fixed charge coverage ratio
of 1.00 to 1.00. As of March 1, 2014, availability under the revolving credit facility was in excess of
$150.0 million and our fixed charge coverage ratio was greater than 1.00 to 1.00.
The senior secured credit facility provides for customary events of default including nonpayment,
misrepresentation, breach of covenants and bankruptcy. It is also an event of default if we fail to make
any required payment on debt having a principal amount in excess of $50.0 million or any event occurs
that enables, or which with the giving of notice or the lapse of time would enable, the holder of such
debt to accelerate the maturity or require the repurchase of such debt. The mandatory repurchase of
the 8.5% convertible notes due 2015 is excluded from this event of default.
On February 21, 2013, we entered into a second priority secured term loan facility, which includes
a $470.0 million second priority secured term loan (the ‘‘Tranche 1 Term Loan’’). The Tranche 1 Term
Loan matures on August 21, 2020 and currently bears interest at a rate per annum equal to LIBOR
plus 4.75% with a LIBOR floor of 1.00%, if we choose to make LIBOR borrowings, or at Citibank’s
base rate plus 3.75%.
On June 21, 2013, we entered into a new second priority secured term loan facility, which includes
a $500.0 million second priority secured term loan (the ‘‘Tranche 2 Term Loan’’). The Tranche 2 Term
Loan matures on June 21, 2021 and currently bears interest at a rate per annum equal to LIBOR plus
3.875% with a LIBOR floor of 1.00%, if we choose to make LIBOR borrowings, or at Citibank’s base
rate plus 2.875%.
The second priority secured term loan facilities and the indentures that govern our secured and
guaranteed unsecured notes contain restrictions on the amount of additional secured and unsecured
debt that can be incurred by us. As of March 1, 2014, the amount of additional secured debt that could
be incurred under the most restrictive covenant of the second priority secured term loan facilities and
these indentures was approximately $1.4 billion (which amount does not include the ability to enter into
certain sale and leaseback transactions). However, we currently cannot 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 generally governed by an interest coverage ratio
test. As of March 1, 2014, we had the ability to issue additional unsecured debt under the second lien
credit facilities and other indentures.
35