Rite Aid 2013 Annual Report Download - page 38

credit facility and certain amounts held on deposit with the senior collateral agent in a concentration
account is less than $100.0 million for three consecutive business days (a ‘‘cash sweep period’’), the
funds in our 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and then held as collateral for the senior obligations until such cash sweep period is rescinded pursuant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 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 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, 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 2, 2013, we were in compliance with this financial covenant.
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 executed a credit agreement governing a new second priority secured
term loan facility, which includes our 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%.
The second priority secured term loan facility 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 2, 2013, the amount of additional secured debt that could
be incurred under the second priority secured term loan facility and these indentures was approximately
$1.1 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 2, 2013, we had
the ability to issue additional unsecured debt under the second lien credit facility and other indentures.
Other 2013 Transactions
In February 2013, we used a portion of the proceeds from the Tranche 6 Term Loan, the proceeds
from our Tranche 1 Second Lien Term Loan, borrowings under our revolving credit facility and
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