15. Indebtedness and Credit Agreement

Following is a summary of indebtedness and lease financing obligations at March 3, 2018 and March 4, 2017:

	2018			2017
Secured Debt:
Senior secured revolving credit facility due January 2020 ($0 and $2,430,000 face value less unamortized debt issuance costs of $13,076 and $24,918)	$	(13,076	)	$	2,405,082
Tranche 1 Term Loan (second lien) due August 2020 ($0 and $470,000 face value less unamortized debt issuance costs of $0 and $4,167)		—			465,833
Tranche 2 Term Loan (second lien) due June 2021 ($0 and $500,000 face value less unamortized debt issuance costs of $0 and $2,431)		—			497,569
Other secured		90			90

		(12,986	)		3,368,574
Guaranteed Unsecured Debt:
9.25% senior notes due March 2020 ($902,000 face value plus unamortized premium of $1,400 and $2,071 and less unamortized debt issuance costs of $4,924 and $7,527)		898,476			896,544
6.75% senior notes due June 2021 ($810,000 face value less unamortized debt issuance costs of $4,877 and $6,360)		805,123			803,640
6.125% senior notes due April 2023 ($1,800,000 face value less unamortized debt issuance costs of $21,708 and $25,984)		1,778,292			1,774,016

		3,481,891			3,474,200
Unguaranteed Unsecured Debt:
7.7% notes due February 2027 ($295,000 face value less unamortized debt issuance costs of $1,460 and $1,625)		293,540			293,375
6.875% fixed-rate senior notes due December 2028 ($128,000 face value less unamortized debt issuance costs of $707 and $771)		127,293			127,229

		420,833			420,604
Lease financing obligations		52,554			65,315

Total debt		3,942,292			7,328,693
Current maturities of long-term debt and lease financing obligations		(21,031	)		(21,335	)

Long-term debt and lease financing obligations, less current maturities	$	3,921,261		$	7,307,358

Reconciliation of indebtedness included in continuing operations and discontinued operations:

	March 3, 2018
	Debt			Lease Financing Obligations			Total Debt and Lease Financing Obligations
Balance, March 3, 2018—per above table	$	3,889,738		$	52,554		$	3,942,292
Amounts reclassified as current and noncurrent liabilities held for sale in connection with the Sale(a)		(549,549	)		(1,108	)		(550,657	)

Total debt and lease financing obligations		3,340,189			51,446			3,391,635
Current maturities of long-term debt and lease financing obligations—continuing operations		(90	)		(20,671	)		(20,761	)

Long-term debt and lease financing obligations, less current maturities—continuing operations	$	3,340,099		$	30,775		$	3,370,874

	March 4, 2017
	Debt			Lease Financing Obligations			Total Debt and Lease Financing Obligations
Balance, March 4, 2017—per above table	$	7,263,378		$	65,315		$	7,328,693
Amounts reclassified as current and noncurrent liabilities held for sale in connection with the Sale(a)		(4,027,400	)		(10,492	)		(4,037,892	)

Total debt and lease financing obligations		3,235,978			54,823			3,290,801
Current maturities of long-term debt and lease financing obligations—continuing operations		(90	)		(17,619	)		(17,709	)

Long-term debt and lease financing obligations, less current maturities—continuing operations	$	3,235,888		$	37,204		$	3,273,092


(a)	In connection with the Sale, the Company is estimating that the Sale will provide total excess cash proceeds of approximately $549,549 and 4,027,400 which will be used to repay outstanding indebtedness as of March 3, 2018 and March 4, 2017, respectively. As such, the Company included estimated excess cash proceeds $549,549 and $4,027,400 as repayment of outstanding indebtedness that has been included in liabilities held for sale as of March 3, 2018 and March 4, 2017. Additionally, as part of the Sale, the Company will be relieved of approximately $1,108 and $10,492, respectively, of capital lease obligations as of March 3, 2018 and March 4, 2017. These amounts are also reflected as liabilities held for sale. Please see Note 4 for additional details.

Credit Facility

The Company's Amended and Restated Senior Secured Credit Facility has a borrowing capacity of $3,000,000 and matures in January 2020. Borrowings under the revolver bear interest at a rate per annum between (i) LIBOR plus 1.50% and LIBOR plus 2.00% with respect to Eurodollar borrowings and (ii) the alternate base rate plus 0.50% and the alternate base rate plus 1.00% with respect to ABR borrowings, in each case, based upon the Average Revolver Availability (as defined in the Amended and Restated Senior Secured Credit Facility). The Company is required to pay fees between 0.250% and 0.375% per annum on the daily unused amount of the revolver, depending on the Average Revolver Availability (as defined in the Amended and Restated Senior Secured Credit Facility). Amounts drawn under the revolver become due and payable on January 13, 2020.

The Company's ability to borrow under the revolver is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files. At March 3, 2018, the Company had $0 of borrowings outstanding under the revolver and had letters of credit outstanding against the revolver of $58,043 which resulted in additional borrowing capacity of $2,941,957.

The Amended and Restated Senior Secured Credit Facility restricts the Company and the Subsidiary Guarantors (as defined herein) from accumulating cash on hand, and under certain circumstances, requires the funds in the Company's deposit accounts to be applied first to the repayment of outstanding revolving loans under the Amended and Restated Senior Secured Credit Facility and then to be held as collateral for the senior obligations.

The Amended and Restated Senior Secured Credit Facility allows the Company to have outstanding, at any time, up to $1,500,000 in secured second priority debt, split-priority term loan debt, unsecured debt and disqualified preferred stock in addition to borrowings under the Amended and Restated Senior Secured Credit Facility and existing indebtedness, provided that not in excess of $750,000 of such secured second priority debt, split-priority term loan debt, unsecured debt and disqualified preferred stock shall mature or require scheduled payments of principal prior to 90 days after the latest of (a) the fifth anniversary of the effectiveness of the Amended and Restated Senior Secured Credit Facility and (b) the latest maturity date of any Term Loan or Other Revolving Loan (each as defined in the Amended and Restated Senior Secured Credit Facility) (excluding bridge facilities allowing extensions on customary terms to at least the date that is 90 days after such date and, with respect to any escrow notes issued by Rite Aid, excluding any special mandatory redemption of the type described in clause (iii) of the definition of "Escrow Notes" in the Amended and Restated Senior Secured Credit Facility). Subject to the limitations described in clauses (a) and (b) of the immediately preceding sentence, the Amended and Restated Senior Secured Credit Facility additionally allows the Company to issue or incur an unlimited amount of unsecured debt and disqualified preferred stock so long as a Financial Covenant Effectiveness Period (as defined in the Amended and Restated Senior Secured Credit Facility) is not in effect; provided, however, that certain of the Company's other outstanding indebtedness limits the amount of unsecured debt that can be incurred if certain interest coverage levels are not met at the time of incurrence or other exemptions are not available. The Amended and Restated Senior Secured Credit Facility also contains certain restrictions on the amount of secured first priority debt the Company is able to incur. The Amended and Restated Senior Secured Credit Facility also allows for the voluntary repurchase of any debt or other convertible debt, so long as the Amended and Restated Senior Secured Credit Facility is not in default and the Company maintains availability under its revolver of more than $365,000.

The Amended and Restated Senior Secured Credit Facility has a financial covenant that requires the Company to maintain a minimum fixed charge coverage ratio of 1.00 to 1.00 (a) on any date on which availability under the revolver is less than $200,000 or (b) on the third consecutive business day on which availability under the revolver is less than $250,000 and, in each case, ending on and excluding the first day thereafter, if any, which is the 30th consecutive calendar day on which availability under the revolver is equal to or greater than $250,000. As of March 3, 2018, the Company had availability under its revolver of $2,941,957, its fixed charge coverage ratio was greater than 1.00 to 1.00, and the Company was in compliance with the senior secured credit facility's financial covenant. The Amended and Restated Senior Secured Credit Facility also contains covenants which place restrictions on the incurrence of debt, the payments of dividends, sale of assets, mergers and acquisitions and the granting of liens.

The Amended and Restated Senior Secured Credit Facility also provides for customary events of default.

With the exception of EIC, substantially all of Rite Aid Corporation's 100 percent owned subsidiaries guarantee the obligations under the Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities, and unsecured guaranteed notes. The Amended and Restated Senior Secured Credit Facility and second priority secured term loan facilities are secured, on a senior or second priority basis, as applicable, by a lien on, among other things, accounts receivable, inventory and prescription files of the Subsidiary Guarantors. The subsidiary guarantees related to the Company's Amended and Restated Senior Secured Credit Facility and second priority secured term loan facilities and, on an unsecured basis, the unsecured guaranteed notes, are full and unconditional and joint and several, and there are no restrictions on the ability of the Company to obtain funds from its subsidiaries. The Company has no independent assets or operations. Additionally, prior to the Acquisition, the subsidiaries, including joint ventures, that did not guarantee the Amended and Restated Senior Secured Credit Facility, the credit facility, second priority secured term loan facilities and applicable notes, were minor. Accordingly, condensed consolidating financial information for the Company and subsidiaries is not presented for those periods. Subsequent to the Acquisition, other than EIC, the subsidiaries, including joint ventures, that do not guarantee the credit facility, second priority secured term loan facilities and applicable notes, are minor. As such, condensed consolidating financial information for the Company, its guaranteeing subsidiaries and non-guaranteeing subsidiaries is presented for those periods subsequent to the Acquisition. See Note 25 "Guarantor and Non-Guarantor Condensed Consolidating Financial Information" for additional disclosure.

2018 Transactions

During fiscal 2018, the Company did not have any debt transactions related to continuing operations.

During January 2018, the Company used proceeds from the Asset Sale to repay and retire all of its outstanding second lien $470,000 tranche 1 term loan and $500,000 tranche 2 term loan principal (the "Second Lien Term Loan Prepayment"). During February 2018, the Company reduced the borrowing capacity on its Amended and Restated Senior Secured Credit Facility from $3,700,000 to $3,000,000. In connection with the transactions, the Company recorded a loss on debt retirement of $8,180, which included interest and unamortized debt issuance costs. The debt repayment and related loss on debt retirement is included in the results of operations and cash flows of discontinued operations.

On February 27, 2018, the Company announced that it had commenced an offer to purchase up to $900,000 of the outstanding 9.25% senior notes due 2020 (the "9.25% Notes"), the 6.75% senior notes due 2021 (the "6.75% Notes") and the 6.125% Senior Notes due 2023 (the "6.125% Notes"), pursuant to the asset sale provisions of the indentures of such notes. On March 29, 2018, the Company accepted for payment, pursuant to its offer to purchase, $3,454 principal amount of the 9.25% Notes, representing 0.38% of the outstanding principal amount of the 9.25% Notes, $3,471 principal amount of the 6.75% Notes, representing 0.43% of the outstanding principal amount of the 6.75% Notes, and $41,751 principal amount of the 6.125% Notes, representing 2.32% of the outstanding principal amount of the 6.125% Notes.

On March 13, 2018, the Company issued a notice of redemption for all of the 9.25%. Notes that were outstanding on April 12, 2018, pursuant to the terms of the indenture of the 9.25% Notes. On April 12, 2018, the Company redeemed 100% of the remaining outstanding 9.25% Notes.

On April 19, 2018, the Company announced that it had commenced an offer to purchase up to $700,000 of its outstanding 6.75% Notes and its 6.125% Notes pursuant to the terms of such indentures. Such offer to purchase will expire at 5:00 P.M., Eastern Time, on May 21, 2018, unless extended or earlier terminated.

2016 Transactions

On April 2, 2015, the Company issued $1,800,000 aggregate principal amount of its 6.125% Notes, the net proceeds of which, along with other available cash and borrowings under its Amended and Restated Senior Secured Credit Facility, were used to finance the cash portion of the Acquisition, which closed on June 24, 2015. The Company's obligations under the notes are fully and unconditionally guaranteed, jointly and severally, on an unsubordinated basis, by all of its subsidiaries that guarantee the Company's obligations under the Amended and Restated Senior Secured Credit Facility, the 9.25% Notes and the 6.75% Notes (the "Rite Aid Subsidiary Guarantors"), including EnvisionRx and certain of its domestic subsidiaries other than, among others, EIC (the "EnvisionRx Subsidiary Guarantors" and, together with the Rite Aid Subsidiary Guarantors, the "Subsidiary Guarantors"). The guarantees are unsecured. The 6.125% Notes are unsecured, unsubordinated obligations of Rite Aid Corporation and rank equally in right of payment with all of its other unsecured, unsubordinated indebtedness.

During May 2015, $64,089 of the Company's 8.5% convertible notes due 2015 were converted into 24,762 shares of common stock, pursuant to their terms. The remaining $79 of the Company's 8.5% convertible notes due 2015 were repaid by the Company upon maturity.

On August 15, 2015, the Company completed the redemption of all of its outstanding $650,000 aggregate principal amount of its 8.00% Notes. In connection with the redemption, the Company recorded a loss on debt retirement, including call premium and unamortized debt issue costs, of $33,205 during the second quarter of fiscal 2016.

Interest Rates and Maturities

The annual weighted average interest rate on the Company's indebtedness was 7.1%, 5.4%, and 5.4% for fiscal 2018, 2017, and 2016, respectively.

The aggregate annual principal payments of long-term debt for the five succeeding fiscal years are as follows: 2019—$90; 2020—$0; 2021—$902,000; 2022—$810,000 and $2,223,000 in 2023 and thereafter.