...Rite Aid Corporation's `B' rating incorporates recent weakening in drug retail results and concerns regarding the company's ability to stabilize EBITDA following the sale of 43% of stores and three distribution centers to Walgreens Boots Alliance, Inc. (BBB/Stable) for $4.38 billion, or around 16.0x LTM EBITDA. Declining operating results have been somewhat mitigated by the more stable results at Rite Aid's Envision Pharmaceutical Services (EnvisionRx) pharmacy benefits management (PBM) business. However, Fitch Ratings expects limited FCF generation and high adjusted leverage (adjusted debt/EBITDAR on a lease-adjusted basis) of approximately 7.5x, even after debt paydown from sale proceeds. While Fitch recognizes some improvement to same-store sales (SSS) in recent quarters after negative comparable store sales (comps) through much of 2016 and 2017, the Negative Outlook reflects concerns that the company may be unable to sustainably reverse weak trends in pharmaceutical network negotiations...
