UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of report (date of earliest event reported): February 20, 2009 (February 18,
2009)
Rite
Aid Corporation
(Exact
name of registrant as specified in its charter)
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Delaware
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1-5742
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23-1614034
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(State
or Other Jurisdiction
of
Incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
Number)
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30
Hunter Lane, Camp Hill, Pennsylvania 17011
(Address
of principal executive offices, including zip code)
(717)
761-2633
(Registrant’s
telephone number, including area code)
N/A
(Former
name or former address, if changed since last report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[
] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[
] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item
1.01. Entry into a Material Definitive Agreement.
On February 18, 2009, Rite Aid
Corporation (the "Company") completed its previously announced $225 million
second priority accounts receivable securitization term loan (the "Second Lien
Facility"), which was $25 million more than previously announced. Net proceeds
from the Second Lien Facility were used to repay approximately $210 million
outstanding under the Company's existing accounts receivable securitization
facility (the "Existing Facility") and replace the borrowing availability that
was decreased under the recent extension of the Existing
Facility. Based on the current concentration limits and provisions in
the Second Lien Facility, the Company continues to have access to up
to $345 million under the Existing Facility, which the Company anticipates will
meet its maximum need from that source of liquidity.
Amounts outstanding under the Second
Lien Facility are secured by second priority liens on the eligible third
party pharmaceutical receivables securing the Existing Facility. The
terms of the credit agreement governing the Second Lien Facility (the "Second
Lien Credit Agreement"), by and among Rite Aid Funding II, as the Borrower, the
lenders party thereto, Citicorp North America, Inc. as the administrative agent,
Rite Aid Hdqtrs. Funding, Inc. as collection agent, each of the parties named on
Schedule III thereto as originators and Citigroup Global Markets Inc. as the
sole lead arranger and sole bookrunning manager, including the covenants and
default and acceleration provisions, are substantially similar to those
governing the Existing Facility, other than the second priority lien on the
pharmaceutical receivables and certain borrowing base requirements. The Second
Lien Credit Agreement also allowed only a one-time draw at the time of closing
and not drawings on a revolving basis, as is the case under the Existing
Facility. Under the Second Lien Facility, the Company will continue
to sell certain of its eligible third party pharmaceutical receivables to a
special purpose entity ("SPE") and retains servicing responsibility. The assets
of the SPE are not available to satisfy the creditors of any other person,
including any of the Company’s affiliates.
The Second Lien Facility was sold at a
discount of 3% and bears interest at a rate of either, at the Company's option,
(a) a base rate equal to the higher of (i) Citibank's base rate, (ii) the
federal funds rate plus 0.50% per annum or (iii) an adjusted LIBO rate plus 1.0%
per annum, in each case plus 11% or (b) LIBOR plus 12% with a LIBOR floor of
3%. The Second Lien Facility will mature on September 14,
2010. Should the Existing Facility not be renewed following its
maturity on January 21, 2010, the Company has access to a backstop
facility, which is backed by the banks under the Existing Facility, and which
continues until September 14, 2010, to provide receivables financing to the
Company.
In connection with entering into the
Second Lien Facility, on February 18, 2009 the Company also entered into an
additional amendment of the Existing Facility (the "Amendment"), by and among
Rite Aid Funding II, CAFCO, LLC, CRC FUNDING, LLC, Falcon Asset Securitization
Company LLC, Variable Funding Capital Company LLC, as the investors, Citibank,
N.A. ("Citibank"), JPMorgan Chase Bank, N.A. ("JPMorgan") and Wachovia Bank,
National Association ("Wachovia"), as the banks, Citicorp North America, Inc.
("CNAI"), as program agent, CNAI, JPMorgan and Wachovia, as investor agents,
Rite Aid Hdqtrs. Funding, Inc., as collection agent, and certain other parties
thereto as originators, which provides availability under the Existing Facility
of up to $345 million and includes other conforming changes to provide for the
addition of the Second Lien Facility.
As
previously disclosed, the Company has four primary sources of liquidity: (i)
cash and cash equivalents, (ii) cash provided by operating activities, (iii) the
sale of accounts receivable under its receivable securitization agreements and
(iv) the revolving credit facility under its senior secured credit facility.
Based upon its current levels of operations, planned improvements in its
operating performance, the approval by its stockholders of the proposed reverse
stock split and the opportunities that it believes the acquisition of Brooks
Eckerd provides, the Company believes that cash flow from operations together
with available borrowings under the senior secured credit facility, sales of
accounts receivable under the Existing Facility and the new Second
Lien Facility and other sources of liquidity will be adequate to meet its
requirements for working capital, debt service and capital expenditures for the
foreseeable future.
The
foregoing descriptions of the Second Lien
Facility and Amendment do not purport to be complete and are qualified in their
entirety by reference to the Second Lien Credit Agreement and the
Intercreditor Agreement and the Amendment, respectively, which are filed as
Exhibits 10.1, 10.2 and 10.3 hereto, respectively.
This
report contains forward-looking statements, including guidance, which are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those expressed or implied in the forward-looking
statements. Factors that could cause actual results to differ materially from
those expressed or implied in such forward-looking statements include the
Company's high level of indebtedness; the Company's ability to
make interest and principal payments on its debt and satisfy the other
covenants contained in the Company's senior secured credit facility
and other debt agreements; the Company's ability to improve the operating
performance of its stores in accordance with its long term
strategy; the Company's ability to realize the benefits of the Brooks
Eckerd acquisition, including positive same store sales growth for Brooks Eckerd
and cost savings; the Company's ability to hire and retain pharmacists
and other store personnel; the efforts of private and public third-party payors
to reduce prescription drug reimbursements and encourage mail order; competitive
pricing pressures, including aggressive promotional activity from its
competitors; the Company's ability to manage expenses, including
integration expenses; the Company's ability to realize the benefits
from actions to further reduce costs and investment in working capital;
continued consolidation of the drugstore industry; changes in state or federal
legislation or regulations; the outcome of lawsuits and governmental
investigations; general economic conditions and inflation and interest rate
movements and access to capital, including the Company's continuing
ability to complete sale and leaseback transactions. Consequently, all of the
forward-looking statements made in this report are qualified by these and
other factors, risks and uncertainties. Readers are also directed to consider
other risks and uncertainties discussed in documents filed by the Company with
the Securities and Exchange Commission. Forward-looking statements can be
identified through the use of words such as "may", "will", "intend", "plan",
"project", "expect", "anticipate", "could", "should", "would", "believe",
"estimate", "contemplate" and "possible".
Item
2.03. Creation of a Direct Financial Obligation or an Obligation
Under an Off-balance Sheet Arrangement of a Registrant.
See description under Item
1.01.
Item
8.01. Other Events
On February 19, 2009, the Company
issued a press release announcing the Second Lien Facility. A copy of
the press release is attached hereto as Exhibit 99.1 and is incorporated herein
by reference.
Item
9.01. Financial Statements and Exhibits
(c)
Exhibits.
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10.1
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Credit
Agreement, dated as of February 18, 2009, among Rite Aid Funding II as the
Borrower and the Lenders party thereto and Citicorp North America, Inc. as
the Administrative Agent and Rite Aid Hdqtrs. Funding, Inc. as Collection
Agent and each of the parties named on Schedule III thereto as Originators
and Citigroup Global Markets Inc. as the Sole Lead Arranger and Sole
Bookrunning Manager
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10.2
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Intercreditor
Agreement, dated as of February 18, 2009, by and among Citicorp North
America, Inc. and Citicorp North America, Inc., and acknowledged and
agreed to by Rite Aid Funding II
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10.3
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Amendment
No. 11 to Receivables Financing Agreement, dated February 18,
2009
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99.1
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Press
Release, dated February 19, 2009
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereto
duly authorized.
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Date:
February 20, 2009
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By:
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/s/
Robert B. Sari
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Name:
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Robert
B. Sari
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Title:
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Executive
Vice President,
General
Counsel and Secretary
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Exhibit
Index
Exhibit
No. Description
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10.1
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Credit
Agreement, dated as of February 18, 2009, among Rite Aid Funding II as the
Borrower and the Lenders party thereto and Citicorp North America, Inc. as
the Administrative Agent and Rite Aid Hdqtrs. Funding, Inc. as Collection
Agent and each of the parties named on Schedule III thereto as Originators
and Citigroup Global Markets Inc. as the Sole Lead Arranger and Sole
Bookrunning Manager
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10.2
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Intercreditor
Agreement, dated as of February 18, 2009, by and among Citicorp North
America, Inc. and Citicorp North America, Inc., and acknowledged and
agreed to by Rite Aid Funding II
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10.3
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Amendment
No. 11 to Receivables Financing Agreement, dated February 18,
2009
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99.1
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Press
Release, dated February 19, 2009
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In reviewing the agreements included as
exhibits to this Current Report on Form 8-K please remember they are included to
provide you with information regarding their terms and are not intended to
provide any other factual or disclosure information about Rite Aid Corporation,
its subsidiaries or the other parties to the agreements. The agreements contain
representations and warranties by each of the parties to the applicable
agreement. These representations and warranties have been made solely for the
benefit of the other parties to the applicable agreement and:
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•
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should
not in all instances be treated as categorical statements of fact, but
rather as a way of allocating the risk to one of the parties if those
statements prove to be inaccurate;
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have
been qualified by disclosures that were made to the other party in
connection with the negotiation of the applicable agreement, which
disclosures are not necessarily reflected in the
agreement;
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may
apply standards of materiality in a way that is different from what may be
viewed as material to you or other investors; and
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were
made only as of the date of the applicable agreement or such other date or
dates as may be specified in the agreement and are subject to more recent
developments.
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Accordingly, these
representations and warranties may not describe the actual state of affairs as
of the date they were made or at any other time. Additional information about
Rite Aid Corporation may be found elsewhere in this report and the
Company's other public filings, which are available without charge through the
SEC’s website at http://www.sec.gov.
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