Rite Aid 2014 Annual Report Download - page 86

RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended March 1, 2014, March 2, 2013 and March 3, 2012
(In thousands, except per share amounts)
11. Indebtedness and Credit Agreement (Continued)
as defined in the senior secured credit facility. The Company is required to pay fees between 0.375%
and 0.50% 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 February 21, 2018.
On March 14, 2014, the Company amended and restated its credit agreement governing its senior
secured credit facility, pursuant to which, it prepaid its outstanding Tranche 6 Term Loan with the
proceeds of a new $1,152,293 Tranche 7 Term Loan. The Tranche 7 Term Loan matures on
February 21, 2020 and currently bears interest at a rate per annum equal to LIBOR plus 2.75%, if the
Company chooses to make LIBOR borrowings, or at Citibank’s base rate plus 1.75%. The Tranche 7
Term Loan is subject to a 0.75% LIBOR floor per annum.
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 March 1, 2014, the Company had
$400,000 of borrowings outstanding under the revolver and had letters of credit outstanding against the
revolver of $79,874, which resulted in additional borrowing capacity of $1,315,126.
The senior secured credit facility contains certain restrictions on the ability of the Company and
the subsidiary guarantors to accumulate cash on hand, and under certain circumstances, requires the
funds in the Company’s deposit accounts to be applied first to the repayment of outstanding revolving
loans under the senior secured credit facility and then to be held as collateral for the senior
obligations.
The senior credit facility restricts the amount of secured and unsecured debt the Company may
have outstanding. The senior secured credit facility allows the Company to incur an unlimited amount
of unsecured debt with a maturity beyond May 21, 2020. However, the Company’s second priority
secured term loan facilities and the indentures that govern the Company’s secured and guaranteed
unsecured notes contain restrictions on the amount of additional secured and unsecured debt that can
be incurred by the Company. Pursuant to certain of the Company’s existing indentures, the Company
could not incur any additional secured debt assuming a fully drawn revolver and the outstanding letters
of credit. The ability to issue additional unsecured debt under the second priority secured term loan
facilities and the indentures is generally governed by an interest coverage ratio test. As of March 1,
2014, the Company had the ability to issue additional unsecured debt under the second lien credit
facilities and other indentures.
The senior secured credit facility contains additional covenants which place restrictions on the
incurrence of debt, the payments of dividends, sale of assets, mergers and acquisitions and the granting
of liens. The 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
$150,000, the Company must maintain a minimum fixed charge coverage ratio of 1.00 to 1.00. As of
March 1, 2014, availability under the revolving credit facility was in excess of $150,000 and our fixed
charge coverage ratio was greater than 1.00 to 1.00. The senior secured credit facility also provides for
customary events of default.
The Company also has a second priority secured term loan facility, which includes a $470,000
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%, if the
85