NEW YORK, Feb 28 (Reuters) - Drugstore chain Rite Aid is adding to the busy new-issue leveraged loan refinancing market with a $1.15 billion first-lien term loan, sources told Thomson Reuters LPC.
The new term loan will refinance the company’s existing term loan of the same size. Rite Aid aims to shave 50bp of interest from the loan to a spread of LIB+275 with a 75bp Libor floor. The existing spread is LIB+300 with a 1 percent Libor floor.
Citi, Wells Fargo, Bank of America Merrill Lynch, GE Capital, Goldman Sachs and Morgan Stanley are joint lead arrangers. Citi is administrative agent.
Rite Aid’s loan adds to an active roughly $46 billion institutional leveraged loan calendar, which has loan investors busy, but not very excited about new deals.
“The primary loan market is busy though not necessarily presenting that many great investment opportunities - lots of repricing deals and weaker terms,” said one loan investor.
Investors and arrangers continue to lament a lack of new money deals. The institutional calendar includes about 60 percent of deals related to companies lowering interest rates on existing debt, including Rite Aid’s new deal.
“Things everywhere in the market are getting so aggressive,” added another loan investor.
Nonetheless, loan market sources say that they are participating more in the primary market versus six months ago, weighing a slew of multi-billion refinancing deals from companies such as Freescale Semiconductor Inc, IMS Health and global healthcare company Grifols.
Allocations are hard to come by on stronger deals, given the continued supply and demand imbalance in the floating-rate loan market, say sources.
Rite Aid is set up for strong reception. The company has had an upswing in recent operating performance with pharmacy price inflation, cost control, and the push of the customer loyalty program. The company’s refinancing efforts have enabled the company to lower interest expense by about $125 million over the past four years, according to management comments in a presentation last month.
Moody’s Investors Service Thursday upgraded Rite Aid’s corporate family rating to B2 from B3. The rating outlook is stable. Standard and Poor’s has a B corporate credit rating and a stable outlook on the company.
Citi declined to comment. Rite Aid did not return calls for comment.
Rite Aid has approximately 4,600 stores in 31 states and the District of Columbia.