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Non-Tech : Rite-AID (RAD) Overdone or Done In?
RAD 0.6480.0%Oct 16 5:00 PM EST
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To: Marty Rubin who wrote (574)3/1/2001 8:08:46 AM
From: KJ. Moy  Read Replies (2) of 700
 
Marty,

I did a little reading and found out that ADVP is paying 11% interest on the $200M senior notes to RAD until April/2002, then 12% from April to October, then 13% afterward. ADVP has to issue 800,000 shares of warrants to RAD at an exercise price of $20 if they do not redeem the notes in two years. So, it is in ADVP's best interest to redeem these notes ASAP.

RAD can potentially lower its debt by about $850M with all these development, $400M from debt swap, $250M from sale of 6.25M shares of ADVP, $200M from the notes. Minus service fee, it is still around $800M. RAD's debt will go down to about $4.1B with $1.1B lease obligation left. With more interest rate cuts and all, RAD's quarterly interest payment will go down to about $100M to $105M by my calculation later this year. A double digit share price by the end of this year is looking better and better.

Let me point out that one of RAD management's gamble pay off big time. At the time when the deal was struck with ADVP in selling PCS back in early July/2000, the stock price of ADVP was about $20. RAD just enhance the deal by $125M in 6 months. This management knows their stuff. With RAD's per store sales of only $3.8M comparing to WAG's $6.7M, RAD can really grow their top line and bottom line if management is doing the right thing. And, they are proving that they can. Money mangers are beginning to believe and give them the credit that they deserve IMHO. Past week's action is no accident. I believe there are more good things to come.

KJ
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