Rite Aid 2012 Annual Report Download - page 37

and then held as Collateral for the senior obligations until such cash sweep period is rescinded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.
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 three months after June 4, 2014. The senior secured credit facility allows us to incur an unlimited
amount of unsecured debt with a maturity beyond three months after June 4, 2014; however, 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. The senior secured facility also
allows, so long as the senior secured credit facility is not in default, for the repurchase of any debt with
a maturity on or before June 4, 2014, for the voluntary repurchase of debt with a maturity after June 4,
2014 and the mandatory repurchase of our 8.5% convertible notes due 2015 if we maintain availability
on the revolving credit facility of more than $100.0 million.
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 has a 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 1.05 to 1.00. As of March 3, 2012, we were in compliance with this financial covenant.
The senior secured credit facility provides for 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 August 2010 amendments
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 March 3, 2012,
the amount of additional secured debt that could be incurred under these indentures was approximately
$1.0 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.
Other 2012 Transactions
During August 2011, we repurchased $41.0 million of our 8.625% senior notes due March 2015,
$5.0 million of our 9.375% senior notes due December 2015 and $4.5 million of our 6.875% senior
debentures due August 2013. These repurchases resulted in a gain for the period of $5.0 million.
In February 2012, we issued $481.0 million of our 9.25% senior notes due March 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 the notes are fully and
unconditionally guaranteed, jointly and severally, on an unsecured unsubordinated basis, by all of our
subsidiaries that guarantee our obligations under our senior secured credit facility and our outstanding
8.00% senior secured notes due 2020, 9.75% senior secured notes due 2016, 10.375% senior secured
notes due 2016, 7.5% senior secured notes due 2017, 10.25% senior secured notes due 2019, 9.375%
senior notes due 2015 and 9.5% senior notes due 2017. The proceeds of the notes, together with
available cash, will be used to repurchase and repay all the outstanding 8.625% senior notes due
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