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Rite Aid Corporation Message Board

  • fuzzhead72 fuzzhead72 Mar 23, 2014 8:15 PM Flag

    where is the $$ for paying debt interest coming from?

    I see that Rite Aid has about 6 billion in debt, and I was wondering where the cash to make payments on this is coming from?

    I was interested in possibly investing in Rite Aid, until I saw the large debt position. I'm worried that as interest rates rise, they may have trouble paying off the debt.

    I would appreciate it if anyone can shed some light on this for me, thanks!

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    • from what I recall from last year, they did a massive debt restructure, pushing but a lot of notes to 2018/2019 and also getting much favorable terms. Along with now turning a profit, and with lillihood of increased phar sales due to increased use of generica along with obamacare, additional income due to format changes of stores to wellness centers and larget sf leading to increased front end revs. Most people have liked what they have seen, hence a nice increase in sp over past year. Also, plenty of talk re possible buyout by larger entity, such as walmart. But, you should do your own dd and decide on your own to buy or not.

      Sentiment: Strong Buy

    • Where do you get $ to pay your mortgage?

    • ifthetruthweretobetold ifthetruthweretobetold Mar 24, 2014 12:08 PM Flag

      I would not invest any money in this stock. The debt (which has only come down by $500 million in the last four years) has mainly happened for two reasons...1) The new CFO that joined the company a few years ago went out and restructured as much of the prior debt as possible, which significantly lowered their interest payments and contributed positively to their earnings. They have used those savings to try and pay down more of the debt. 2) They have been the beneficiary of growth in generics. The problem is...they do not have the capital to build new stores and that is where you pick up scrip count (which is key in this industry) and their retail front-end business is average at best. They have had a record run for the stock, but the underlying culture of the company and its customer base has not changed materially. Get out while you can. The Executive Management is cashing in as you can see by the selling of their stock. This is a temporary gig for these guys...they were successful at a similar situation at Pathmark before Pathmark was sold to A&P several years ago. Look where A&P and Pathmark are now. They got out while the getting was good. The same will happen here.

    • Obviously they pay over $400 million a year in interest expense. Lately they have reduced the interest rate and paid down some debt and still earned income. They still have a lot of debt, but they seem to be doing positive things. That is why it's up so much. Today some people are cashing in. I just bought somemore.

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