January 23, 2009 / 4:46 PM / 9 years ago

Moody's cuts Rite Aid ratings, cites liquidity concern

3 Min Read

NEW YORK, Jan 23 (Reuters) - Moody's Investors Service on Friday cut its ratings on Rite Aid Corp (RAD.N) to a deeply speculative grade, saying the drugstore chain is facing near term liquidity pressures if it is unable to turnaround its negative cash flow.

The rating agency added that Rite Aid's high debt load is unsustainable relative to its current operating performance.

Moody's cut Rite Aid's corporate family rating one notch to "Caa2" and gave it a negative outlook, indicating another downgrade may be likely in the next 12 months to 18 months.

"We expect that availability under Rite Aid's $1.75 billion asset based revolving credit facility will continue to erode unless the company is able to significantly reduce its free cash flow deficits through improvements in working capital and operating performance," Moody's said in a release.

The drugstore chain last month reported its sixth straight quarterly loss as sales fell and forecast a bigger loss this year as shoppers cut back in a recession, sending its depressed shares down nearly 18 percent. For details, see [ID:nN18143411]

The "Caa2" rating also considers that the company's revolving credit facility expires and its $145 million term loan matures in September 2010," Moody's said.

"Given the current state of the credit markets, Rite Aid faces potential difficulties in refinancing these facilities," the rating agency added.

"While the company appears to have enough availability to fund its free cash deficit over the next twelve months, unfavorable operating results and/or a failure to generate material cash through working capital reductions during the period could rapidly absorb this availability," Moody's said.

Rite Aid said on Friday it renewed an existing financing agreement through next January, though the amount of its borrowing availability was reduced, leading the drugstore chain to get another loan for up to $200 million. For details, see [ID:nN23400765] (Reporting by Karen Brettell; Editing by Neil Stempleman)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below