Citi Leads Debt Financing For Drugstore Deal

Citigroup will lead debt financing for Rite Aid's $3.4 billion acquisition of Jean Coutu Group's Brooks and Eckerd stores. Terms of the deal and pricing could not be determined by press time. Jean Coutu will receive $1.45 billion in cash and $250 million in shares of Rite Aid common stock. Rite Aid will also assume $850 million of Jean Coutu's existing 8.5% senior subordinated notes. Rite Aid expects to finance the deal through a combination of existing cash and approximately $1.45 billion in bank borrowings, according to Standard & Poor's.

S&P placed Rite Aid on CreditWatch with negative implications after the acquisition was announced. The ratings agency said Rite Aid's leverage could rise to 7.5 times EBITDA after the merger, up from 7 times at the end of 2005.