Rite Aid 2011 Annual Report Download - page 85

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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)
10. Indebtedness and Credit Agreement (Continued)
Credit Facility
The Company has a senior secured credit facility that consists of a $1,175,000 revolving credit
facility and two term loans. Borrowings under the revolving credit facility bear interest at a rate per
annum between LIBOR plus 3.25% and LIBOR plus 3.75% if the Company chooses to make LIBOR
borrowings, or between Citibank’s base rate plus 2.25% and Citibank’s base rate plus 2.75%, in each
case based upon the amount of revolver availability, as defined in the senior secured credit facility. The
Company is required to pay fees between 0.50% and 0.75% 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 August 19, 2015, provided that such maturity date shall instead be
April 18, 2014 in the event that on or prior to April 18, 2014 the Company does not repay, refinance
or otherwise extend the maturity date of its Tranche 2 Term Loan (as defined below) to a date that is
at least 90 days after August 19, 2015 and, in the case of a repayment or refinancing, the Company
must have at least $500,000 of availability under the revolver.
The Company’s ability to borrow under the revolver is based upon a specified borrowing base
consisting of accounts receivable, inventory and prescription files. At February 26, 2011, the Company
had $28,000 of borrowings outstanding under the revolver and had letters of credit outstanding
thereunder of $142,686 which gave the Company additional borrowing capacity of $1,004,314.
The credit facility also includes a $1,105,000 senior secured term loan (the ‘‘Tranche 2 Term
Loan’’). The Tranche 2 Term Loan will mature on June 4, 2014 and currently bears interest at a rate
per annum equal to LIBOR plus 1.75%, if the Company elects LIBOR borrowings, or at Citibank’s
base rate plus 0.75%. 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 2 Term Loan may also be required.
The senior secured credit facility also restricts the Company and the subsidiary guarantors from
accumulating cash on hand in excess of $200,000 at any time when revolving loans are outstanding (not
including cash located in the Company’s store deposit accounts, cash necessary to cover the Company’s
current liabilities and certain other exceptions) and from accumulating cash on hand with revolver
borrowings in excess of $100,000 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 the Company’s senior secured credit facility or (b) the sum of revolver availability
under the Company’s senior secured credit facility and certain amounts held on deposit with the senior
collateral agent in a concentration account is less than $100,000 for three consecutive business days
(a ‘‘cash sweep period’’), the funds in the Company’s 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 the Company’s senior secured credit facility.
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