UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Item 1.01. Entry Into a Material Definitive Agreement.
Receivable Purchase Agreement
On February 3, 2023, Elixir Insurance Company (the “Seller”), a wholly-owned indirect subsidiary of Rite Aid Corporation (the “Company”), entered into a receivable purchase agreement (the “Receivable Purchase Agreement”) with Part D Receivable Trust 2020-1 (Series G) (the “Series G Purchaser”), a Delaware statutory trust beneficially owned, directly or indirectly, by Bank of America, N.A. (“BOA”), and, solely for the purposes set forth therein, Part D Receivable Trust 2020-1 (Series F) (the “Series F Purchaser”), a Delaware statutory trust beneficially owned, directly or indirectly, by BOA.
As previously announced, on October 13, 2022, Series F Purchaser purchased from Seller all of Seller’s right, title and interest in the outstanding amount, as of June 30, 2021, of the 2020 Medicare Part D final reconciliation payment which is anticipated to be paid by the Centers for Medicare & Medicaid Services, an agency within the U.S. Department of Health and Human Services (“CMS”), to Seller on or about November 3, 2023 (the “Receivable”). Pursuant to the terms and conditions set forth in the Receivable Purchase Agreement, Series G Purchaser purchased from Seller all of Seller’s right, title and interest in the balance of the Receivable not previously sold to Series F Purchaser (the “Receivable Balance”). As of December 31, 2022, the book value of the Receivable Balance was approximately $278.4 million. The Receivable is to be paid by CMS pursuant to a contract, last signature dated as of September 14, 2021, by and between CMS and Seller (the “Contract”). On the closing date, the Company realized net cash proceeds of approximately $242.6 million, which it intends to use to repay borrowings under its revolving credit facility (without a reduction in commitment). Under certain circumstances, as set forth in the Receivable Purchase Agreement, Seller has a right to a purchase price adjustment of up to approximately $19.2 million (the “Deferred Purchase Price”) payable thirty (30) days following remittance to Series G Purchaser of the final payment made by CMS in respect of the Receivable. The book value of the Receivable Balance of approximately $278.4 million less the sum of the Deferred Purchase Price of approximately $19.2 million and the net cash proceeds of approximately $242.6 million resulted in a non-operating loss of approximately $16.6 million that the Company recognized on the sale of the Receivable Balance, which is equivalent to approximately 6.0% of the book value of the Receivable Balance.
The parties to the Receivable Purchase Agreement have each made customary representations and warranties. Seller agreed to various covenants and agreements, including, among others, Seller’s agreement to perform in all material respects all terms, covenants and other provisions required to be performed by it under the Contract and to service the Receivable Balance. The Receivable Purchase Agreement contains specified repurchase rights that would require Seller to repurchase the Receivable Balance upon Series F Purchaser’s request if certain events occur in respect of the Receivable Balance prior to the termination of the Receivable Purchase Agreement.
Indemnity Agreement
On February 3, 2023, to induce Series G Purchaser to enter the Receivable Purchase Agreement, the Company entered into an indemnity agreement (the “Indemnity Agreement”) with Series G Purchaser. Pursuant to the terms set forth in the Indemnity Agreement, the Company has agreed to indemnify, reimburse and hold Series G Purchaser harmless from certain liabilities and expenses actually suffered or incurred by Series G Purchaser resulting from the occurrence of certain events in respect of the Receivable Balance, as specified therein. The Company’s liability under the Indemnity Agreement is capped at Seller’s liability under the Receivable Purchase Agreement plus certain costs and expenses.
The foregoing description of the Receivable Purchase Agreement, the Indemnity Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the Receivable Purchase Agreement, a copy of which is filed as Exhibit 2.1 hereto, and the Indemnity Agreement, a copy of which is filed as Exhibit 2.2 hereto, each of which is incorporated herein by reference. It is not intended to provide any factual information about the Company, Seller or their respective subsidiaries and affiliates. Each of the Receivable Purchase Agreement and the Indemnity Agreement contains representations and warranties by the contracting parties, which were made only for purposes of those agreements and as of specified dates. The representations, warranties and covenants in each of the Receivable Purchase Agreement and the Indemnity Agreement were made solely for the benefit of the contracting parties; are subject to limitations agreed upon by the contracting parties; may have been made for the purposes of allocating contractual risk between the contracting parties instead of establishing these matters as facts; and are subject to standards of materiality applicable to the contracting parties that may differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Seller or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Receivable Purchase Agreement and the Indemnity Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| 2.1* | Receivable Purchase Agreement, dated as of February 3, 2023, by and between Seller and Series G Purchaser. | |
| 2.2 | Indemnity Agreement, dated as of February 3, 2023, by and between the Company and Series G Purchaser (included as Exhibit B to Exhibit 2.1). | |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL). |
* Certain information has been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted information to the Securities and Exchange Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized.
| Date: February 3, 2023 | By: | /s/ Matthew C. Schroeder |
| Name: | Matthew C. Schroeder | |
| Title: | Executive Vice President and Chief Financial Officer |