Rite-Aid Corp.'s announcement last Tuesday that it would offer to exchange $321.6 million in bonds for stock sparked a trade of the Rite Aid.Com credit in the 80 range. Dealers reported a second trade on Wednesday between 86 and 87, with upwards of $50 million trading in the two days. One trader said the levels had softened after hitting a high of 86. "Doing the exchange with the convertibles takes a lot of liquidity pressure off the company," he said. The national drugstore chain is based in Camp Hill, Pa. It merged with Drugstore.Com to provide online pharmacy information and services. A spokeswoman declined to comment on trading levels.
Company officials said the move was taken to reduce debt. Rite Aid intends to offer 145 shares of its common stock in exchange for each $1,000 principal amount of 5.25% convertible subordinated notes due in 2002. The spokeswoman said the company has previously used this method to reduce debt. Rite Aid has a $1 billion facility that breaks down into two tranches and matures next year. It is priced at 3% over LIBOR. Citigroup Inc., Heller Financial, FleetBoston Financial and Foothill Capital Corp. are the lead arrangers.