Friday, October 10, 2008

Rite Aid Ready For a Tumble (Not to Get Back Up)?

So two days ago Rite Aid releases this press release. OK: Halloween accounts for a significant jump in retail sales in America; they want to cash in on it too. So far so good. But, by sheer coincidence, that same day, Rite Aid put out its 10-Q, which had some truly scary stuff in it.

One of the big problems is that the stock is trading below a buck - 53 cents this morning - which puts it in danger of being delisted and prompted a wide range of new warnings in the filing, including:
In addition, delisting of our common stock on the NYSE would constitute a “fundamental change” under the indenture governing our 8.5% convertible notes due 2016 (the “Convertible Notes”). If such a fundamental change occurs, holders of the Convertible Notes will be entitled to require us to repurchase their Convertible Notes, or any portion of the principal amount thereof at a price equal to 100% of the principal amount of the Convertible Notes to be repurchased, together with accrued interest…We can give no assurance that we would be able to obtain such financing, on favorable terms, or at all, or that we will be permitted to repurchase the Convertible Notes under our other debt instruments.
There were also new sharp warnings about the company’s highly leveraged position. While the company has been warning about this for awhile (sure its the consumer Mary), the details that it provides in the filing are much more extensive, and, let’s call it what it is here: scary.

Happy Halloween!

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