iii. What is meant by the terms “senior”, “fixed-rate”, and “convertible”?
Senior debt, frequently issued in the form of senior notes or referred to as senior loans, is debt that takes priority over other unsecured or otherwise more “junior” debt owed by the issuer. senior debt has greater seniority in the issuer’s capital structure than subordinated debt. In the event the issuer goes bankrupt, senior debt theoretically must be repaid before other creditors receive any payment.
Convertible notes are unsecured and are effectively junior to the secured debt of the company. The notes are convertible, at the option of the holder, into shares of the company’s common stock. For Rite Aid, it is at a conversion price of $2.59 per share, subject to adjustment to prevent dilution, at any time.
iv. Speculate as to why Rite Aid has many different types of debt with a range of interest rates.
Debt in Education The loans and financial obligations that last for longer than one year are generally regarded as long-term debts. It is important to exercise a regular control over such debts, on the part of every individual, to avoid turning them into financial burden. The long-term debts main characteristic is that it usually doesnt apply a deadline for the repayment of the whole amount of ...
Rite Aid has many different types of debt like secured debt, guaranteed unsecured debt and unsecured unguaranteed debt. All of these are with a range of interest rates.
Rite Aid might need different sources of financing to fund its different activities. Because each source has its own terms and conditions that’s why they are getting different interest rates. Some of its debt has to be paid with greater priority and some are with greater interest rates. The company is in compliance with restrictions and limitations included in the provisions of various loan and credit agreements.