Rite Aid sells $1.8B of bonds to fund Envision purchase

NEW YORK – Rite Aid Corp., the third-largest U.S. drugstore chain, sold $1.8 billion of bonds Thursday to fund its acquisition of Envision Pharmaceutical Services Inc.

The 6.125 percent, eight-year senior unsecured notes sold at par to yield 4.34 percentage points more than similar- maturity Treasuries, Bloomberg data show. Proceeds will be combined with other available cash to finance the $2 billion Envision deal, which is expected to close by September, according to a Wednesday statement. If the acquisition isn’t completed, the capital may be used to refinance debt or to redeem the bonds, according to the statement.

Rite Aid is buying the pharmacy-benefits manager from private-equity firm TPG as the retailer shifts toward offering services that help insurers and large employers provide drug coverage, challenging industry leaders CVS Health Corp. and Express Scripts Holding Co. The Camp Hill, Penn.-based company last issued bonds in June 2013, when it sold $810 million of 6.75 percent notes due 2021 to refund a similar amount of 9.5 percent bonds due in 2017.

Moody’s Investors Service awarded the securities a rating of B3, which is six levels below investment-grade and one step above Standard & Poor’s assessment of CCC+.

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“We expect Rite Aid will not face any significant challenges from the Envision acquisition and that Rite Aid will repay a portion of borrowings under its revolving credit facility thus reducing overall debt levels,” Moody’s said in a statement.

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