Rite Aid 2011 Annual Report Download - page 34

to the senior secured credit facility exclude the mandatory repurchase of the 8.5% convertible notes
due 2015 from this event of default.
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 February 26,
2011, the amount of additional secured debt that could be incurred under these indentures was
approximately $1.1 billion (which amount does not include the ability to enter into certain sale and
leaseback transactions). However, we could not incur any additional secured debt as of February 27,
2010 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.
At the end of March 2011, we made an excess cash flow repayment of $39.8 million of the
Tranche 2 Term Loan and the Tranche 5 Term Loan, as required under our senior secured credit
facility. This excess cash flow payment will be in lieu of scheduled amortization payments over the next
three fiscal years.
Other 2011 Transactions
In August 2010, we issued $650.0 million of our 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. Our 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 our 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 our 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 our 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 our 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, we repurchased $93.8 million of our $158.0 million outstanding 8.5% convertible
notes. The remaining 8.5% convertible notes require us to maintain a listing on the NYSE or certain
other exchanges. In the event of a NYSE delisting, holders of these notes could require us to
repurchase them, which we have the ability to do under the terms of our senior secured credit facility.
On July 30, 2010 we received a notice of non-compliance from the NYSE because the price of our
common stock has fallen below the NYSE’s minimum share price rule. Our common stock continued
to trade as usual on the NYSE and on March 1, 2011, we received notice that we have regained
compliance with the NYSE’s minimum share price listing requirement. We are currently in compliance
with all NYSE listing rules.
Other 2010 Transactions
In October 2009, we issued $270.0 million of our 10.25% senior secured notes due October 15,
2019. The notes are unsecured, unsubordinated obligations of Rite Aid Corporation and rank equally in
right of payment with all other unsubordinated indebtedness. Our obligations under these notes are
guaranteed, subject to certain limitations, by the same subsidiaries that guarantee the obligations under
the senior secured credit facility. The guarantees are secured by shared second priority liens with
holders of the 10.375% senior secured notes due 2016 and 7.5% senior secured notes due 2017. The
indenture that governs the 10.25% notes contains covenant provisions that, among other things, include
limitations on our ability to pay dividends, make investments or other restricted payments, incur debt,
grant liens, sell assets and enter into sale-leaseback transactions. The 10.25% senior secured notes due
October 2019 were issued at 99.2% of par.
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