Rite Aid 2011 Annual Report Download - page 107

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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)
20. Financial Instruments
The carrying amounts and fair values of financial instruments at February 26, 2011 and
February 27, 2010 are listed as follows:
2011 2010
Carrying Fair Carrying Fair
Amount Value Amount Value
Variable rate indebtedness ..... $1,425,019 $1,386,861 $2,120,618 $1,990,963
Fixed rate indebtedness ....... $4,654,548 $4,544,974 $4,097,590 $3,632,738
Cash, trade receivables and trade payables are carried at market value, which approximates their
fair values due to the short-term maturity of these instruments.
The following methods and assumptions were used in estimating fair value disclosures for financial
instruments:
LIBOR-based borrowings under credit facilities:
The carrying amounts for LIBOR-based borrowings under the credit facilities, term loans and term
notes are estimated based on the quoted market price of the financial instruments.
Long-term indebtedness:
The fair values of long-term indebtedness are estimated based on the quoted market prices of the
financial instruments. If quoted market prices were not available, the Company estimated the fair value
based on the quoted market price of a financial instrument with similar characteristics.
21. Subsequent Events
As of February 26, 2011, the Company had a $342,125 senior secured term loan (the ‘‘Tranche 3
Term Loan’’) outstanding under the Company’s existing senior secured credit facility. On March 3,
2011, the Company refinanced its Tranche 3 Term Loan with a $343,000 senior secured term loan (the
‘‘Tranche 5 Term Loan’’). The Tranche 5 Term Loan matures on March 3, 2018, although the maturity
shall instead be December 1, 2014 in the event that the Company does not repay or refinance the
outstanding 8.625% senior notes due 2015 prior to that time, or September 16, 2015, in the event that
the Company does not repay or refinance the outstanding 9.375% senior notes due 2015 prior to that
time. The Tranche 5 Term Loan bears interest at a rate per annum equal to LIBOR plus 3.25% with a
1.25% LIBOR floor, and is subject to a 1% prepayment fee in the event it is refinanced within the first
year after issuance with the proceeds of a substantially concurrent issuance of new loans or other
indebtedness incurred for the primary purpose of repaying, refinancing or replacing the Tranche 5 Term
Loan. Mandatory prepayments are required to be made from proceeds of asset dispositions and
casualty events (subject to certain limitations), a portion of excess cash flows (as defined in the senior
secured credit facility) and proceeds from certain issuances of equity or debt (subject to certain
exceptions). If at any time there is a shortfall in the borrowing base under the senior credit facility,
prepayment of the Tranche 5 Term Loan may also be required. In connection with the Tranche 3 Term
Loan repayment and retirement, the Company will record a loss on debt modification of $22.4 million
107