Rite Aid
Rite Aid
1) a. The secure debt of Rite Aid is tied to specific assets. Unsecured debt is money that Rite Aid borrowed from financial institutions and has no collateral tied to it. Rite Aid distinguish between these two types of debt to give a clear pictures to investors, credit rating agencies, and lenders that they will be able to make interest and principal payments on time.
b. A guarantee debt is an assurance if one party defaults; another party will pay the debt. Rite Aid wholly-owned subsidiaries guarantee the debt.
2) Per note 11, Indebtedness and Credit Agreement:
Total Debt
6,370,899 ~BS
Due within the coming FY
(51,502)
Per Balance Sheet:
Current Maturities of LTD
51,502
LTD, less current maturities
6,185,633
Lease Financing Obligation, less current maturities
133,764
Total
6,370,899 ~Note 11
3) a. Rite Aid did not have to pay the face value to repurchase these notes in the open market, because the note maturity is June 2017, therefore is not fully amortized to the note face value yet.
b. The market rate of interest is higher than the coupon rate and the effective rate of interest. At the open market, the repurchased of these notes resulted in a gain which means that the current market rate exceeds the effective rate of interest at time of issue.
4) Firms use convertible notes to raise money, to offer the bond at a lower coupon rate, to have more of the operating income available for the common stockholder, and to attract investors that may not otherwise be interested. An investor would buy these types of bonds because it gives you the option to convert to stocks. If converted, the firm would reduce a liability and increase equity on the balance sheet for the amount converted.
5) a.
Ratio
Definition
Industry Avg
Rite Aid 2010
Rite Aid 2009
Common-size debt
Total Liabilities/Total Assets
48.83%
(9,723,462/8,049,911)=
120.79%
(9,526,192/8,326,540)=
114.41%
Common-size interest expense
1) a. The secure debt of Rite Aid is tied to specific assets. Unsecured debt is money that Rite Aid borrowed from financial institutions and has no collateral tied to it. Rite Aid distinguish between these two types of debt to give a clear pictures to investors, credit rating agencies, and lenders that they will be able to make interest and principal payments on time.
b. A guarantee debt is an assurance if one party defaults; another party will pay the debt. Rite Aid wholly-owned subsidiaries guarantee the debt.
2) Per note 11, Indebtedness and Credit Agreement:
Total Debt
6,370,899 ~BS
Due within the coming FY
(51,502)
Per Balance Sheet:
Current Maturities of LTD
51,502
LTD, less current maturities
6,185,633
Lease Financing Obligation, less current maturities
133,764
Total
6,370,899 ~Note 11
3) a. Rite Aid did not have to pay the face value to repurchase these notes in the open market, because the note maturity is June 2017, therefore is not fully amortized to the note face value yet.
b. The market rate of interest is higher than the coupon rate and the effective rate of interest. At the open market, the repurchased of these notes resulted in a gain which means that the current market rate exceeds the effective rate of interest at time of issue.
4) Firms use convertible notes to raise money, to offer the bond at a lower coupon rate, to have more of the operating income available for the common stockholder, and to attract investors that may not otherwise be interested. An investor would buy these types of bonds because it gives you the option to convert to stocks. If converted, the firm would reduce a liability and increase equity on the balance sheet for the amount converted.
5) a.
Ratio
Definition
Industry Avg
Rite Aid 2010
Rite Aid 2009
Common-size debt
Total Liabilities/Total Assets
48.83%
(9,723,462/8,049,911)=
120.79%
(9,526,192/8,326,540)=
114.41%
Common-size interest expense