If you just saw the headlines that Rite Aid Corporation (NYSE: RAD) was going to offer another $481 million in debt you might think that the company was just leveraging up a leveraged situation. That is not really the case today, although it may be close to a ‘neutral’ event on its long-term balance sheet’s liabilities.
The company intends to sell $481.0 million of a new series of senior notes due out in 2020. These are said to be unsecured and unsubordinated obligations which are guaranteed by substantially all of Rite Aid’s subsidiaries. The reality is that this is a refinancing transaction and it puts the debt maturity schedule way down the road.
The troubled drug store chain is going to use the net proceeds of the offering to pay “the consideration, accrued and unpaid interest and related fees and expenses in connection with today’s previously announced tender offer for any and all of its outstanding 8.625% senior notes due 2015 and related consent solicitation.” Rite Aid also expects to call for redemption any 8.625% senior notes due 2015 not tendered in the tender offer.
Rite Aid shares briefly hit a 52-week high of $1.64 against a 52-week trading range of $0.85 to $1.61. Shares are currently up 9.5% at $1.60 on more than 13 million shares.
It may seem hard to believe, but Rite Aid has speculative stock options out to July.
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