Rite Aid 2016 Annual Report Download - page 121

RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended February 27, 2016, February 28, 2015 and March 1, 2014
(In thousands, except per share amounts)
14. Indebtedness and Credit Agreement (Continued)
in clause (iii) of the definition of ‘‘Escrow Notes’’ in the Amended and Restated Senior Secured Credit
Facility). Subject to the limitations described in clauses (a) and (b) of the immediately preceding
sentence, the Amended and Restated Senior Secured Credit Facility additionally allows the Company to
issue or incur an unlimited amount of unsecured debt and disqualified preferred stock so long as a
Financial Covenant Effectiveness Period (as defined in the Amended and Restated Senior Secured
Credit Facility) is not in effect; provided, however, that certain of the Company’s 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 or other exemptions are not available. The Amended and
Restated Senior Secured Credit Facility also contains certain restrictions on the amount of secured first
priority debt the Company is able to incur. The Amended and Restated Senior Secured Credit Facility
also allows for the voluntary repurchase of any debt or other convertible debt, so long as the Amended
and Restated Senior Secured Credit Facility is not in default and the Company maintains availability
under its revolving credit facility of more than $365,000.
The Amended and Restated Senior Secured Credit Facility has a financial covenant that requires
the Company to maintain a minimum fixed charge coverage ratio of 1.00 to 1.00 (a) on any date on
which availability under the revolving credit facility is less than $200,000 or (b) on the third consecutive
business day on which availability under the revolving credit facility is less than $250,000 and, in each
case, ending on and excluding the first day thereafter, if any, which is the 30th consecutive calendar day
on which availability under the revolving credit facility is equal to or greater than $250,000. As of
February 27, 2016, the availability was at a level that did not trigger this covenant. The Amended and
Restated Senior Secured Credit Facility also contains 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 Amended and Restated Senior Secured Credit Facility also provides for customary events of
default.
The Company also has two second priority secured term loan facilities. The first 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% with a LIBOR floor of 1.00%, if the Company chooses to make LIBOR borrowings, or at
Citibank’s base rate plus 3.75%. The second includes a $500,000 second priority secured term loan (the
‘‘Tranche 2 Term Loan’’). The Tranche 2 Term Loan matures on June 21, 2021 and currently bears
interest at a rate per annum equal to LIBOR plus 3.875% with a LIBOR floor of 1.00%, if the
Company chooses to make LIBOR borrowings, or at Citibank’s base rate plus 2.875%.
With the exception of EIC, substantially all of Rite Aid Corporation’s 100 percent owned
subsidiaries guarantee the obligations under the Amended and Restated Senior Secured Credit Facility,
second priority secured term loan facilities, and unsecured guaranteed notes. The Amended and
Restated Senior Secured Credit Facility and second priority secured term loan facilities are secured, on
a senior or second priority basis, as applicable, by a lien on, among other things, accounts receivable,
inventory and prescription files of the Subsidiary Guarantors. The subsidiary guarantees related to the
Company’s Amended and Restated Senior Secured Credit Facility and second priority secured term
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