CVS Completes $386 Million Sale Leaseback of 110 Drug Stores

Moody's Investor Service - December 15, 2005

Based on information received through December 14, Moody's Investors Service assigns a provisional (P) A3 rating to approximately $386.1 million of Certificates to be issued by a trust that will acquire 110 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 fee or ground-leased properties. The loans mature in January 2028. 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 110 drugstores are located in 26 states.

Moody's determined that, among other factors, 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 A3, stable 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. Sphere: Related Content