CVS Completes $127.5 Million Lease Financing of 46 Stores

MOODY'S ASSIGNS RATING OF (P)A2 TO CVS LEASE-BACKED PASS-THROUGH CERTIFICATES, SERIES 2003-1

New York, September 03, 2003 -- Based on information received through September 3, 2003, Moody's Investors Service assigns a provisional (P) A2 rating to approximately $127.5 million of Certificates to be issued by a trust that will acquire 46 first-priority lien commercial mortgage, credit-tenant lease loans. The loans will be secured by newly constructed drug stores and related realty that will be triple-net leased to subsidiaries of CVS Corporation. Each of the leases will be bondable and guaranteed by CVS Corporation, and bankruptcy-remote, special purpose borrowers will own each of the properties. The loans generally mature in 2025. Fixed net rent under the leases, plus a pre-funded interest reserve, will be sufficient to pay in full all interest and principal of the loans. The 46 drugstores are located in eighteen states.

Moody's determined that the dark value of the collateral is sufficient, assuming a bankruptcy of CVS and rejection of the leases, to support the expected loss consistent with the Certificates' rating. The rating of the Certificates is primarily based on the senior unsecured debt rating of CVS Corporation, which is currently A2, negative outlook; therefore, the Certificates' rating will change as the senior unsecured debt rating of CVS Corporation may change. The rating of the Certificates was also based on the overall structure and legal integrity of the transaction.
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