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Duane Reade Holdings, Inc. Announces Cash Tender Offers for Senior Secured Floating Rate Notes and Senior Subordinated Notes and Solicitation of Consents to Related Indentures

Saturday, September 19, 2009 General News J E 4
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NEW YORK, July 8 Duane Reade Holdings, Inc. announced today that its wholly-owned subsidiaries, Duane Reade Inc. and Duane Reade (collectively, the "Issuers"), are commencing fixed price offers to purchase for cash (i) any and all of the Issuers' $210 million outstanding aggregate principal amount of their Senior Secured Floating Rate Notes due 2010 (the "Floating Rate Notes") (the "FRN Offer") and (ii) any and all of the Issuers' $195 million outstanding aggregate principal amount of 9.75% Senior Subordinated Notes due 2011 (the "Subordinated Notes" and, together with the Floating Rate Notes, the "Notes") (the "Subordinated Notes Offer" and, together with the FRN Offer, the "Offers").

The terms and conditions of the Offers are set forth in the Offer to Purchase and Solicitation of Consents dated July 8, 2009 (the "Offer to Purchase") and the related Letter of Transmittal (the "Letter of Transmittal"). The following table sets forth the material pricing terms of the Offers:

In connection with the Offers, the Issuers are soliciting consents of the holders of the Notes to the proposed amendments to the indentures governing the Notes, which would, among other things, remove substantially all of the restrictive covenants in such indentures and, in case of the indenture governing the Floating Rate Notes, release all of the collateral securing the Floating Rate Notes. Holders who tender their Notes in the relevant Offer will be deemed to have consented to the applicable proposed amendments.

Holders who validly tender (and do not validly withdraw) their Notes in the relevant Offer and give their consents in the relevant solicitation of consents prior to 11:59 p.m. New York City time on July 21, 2009 (as such date may be extended, the "Consent Payment Deadline") will receive the relevant consent payment of $30 per $1,000 principal amount of the Notes (the "Consent Payment"). The Consent Payment is included in, and not in addition to the Total Consideration.

The Offers will expire at 11:59 p.m., New York City time, on August 4, 2009, unless extended (the "Expiration Time"). Holders who wish to participate in the relevant Offer and receive the Total Consideration (which includes the Consent Payment) with respect to such Offer must validly tender their Notes on or prior to the relevant Consent Payment Deadline. Tenders of the Notes pursuant to the relevant Offer may be withdrawn at any time prior to the execution of the supplemental indenture with respect to such Notes, which is expected to be at or prior to 11:59 p.m. New York City time on July 21, 2009, but not thereafter.

The Offers and solicitations of consents are conditioned upon, among other things, (i) the funding of a $125 million preferred equity investment by entities associated with Oak Hill Capital Partners, L.P. (the "Equity Investment"), (ii) the receipt of sufficient proceeds from the offerings of new senior secured notes and new senior subordinated notes (the "New Notes Offerings") to pay for all Notes and related consents accepted in the Offers, (iii) at least 90% of the outstanding principal amount of the Floating Rate Notes having been validly tendered (and not validly withdrawn) in the FRN Offer; (iv) at least 85% of the outstanding principal amount of the Subordinated Notes having been validly tendered (and not validly withdrawn) in the Subordinated Notes Offer; (v) receipt of the requisite consents to the proposed amendments and execution of the applicable supplemental indentures; and (vi) certain other conditions as specified in the Offer to Purchase. In addition, the Equity Investment and the New Notes Offerings are conditioned on the successful completion of each other and other conditions precedent specified in the Offer to Purchase.

This press release is neither an offer to purchase, nor a solicitation for acceptance of the offer. The Issuers are making the offers only by, and pursuant to the terms of, the Offer to Purchase and the related Letter of Transmittal. In addition, this press release does not constitute an offer to sell or a solicitation of offers to purchase any securities of the Issuers.

The complete terms and conditions of the Offers are set forth in the Offer to Purchase and Letter of Transmittal that will be sent to holders of the Notes. Holders are urged to read the tender offer documents carefully when they become available. Copies of the Offer to Purchase and Letter of Transmittal may be obtained from the Information Agent for the Offers and Solicitations of Consents, Global Bondholder Services Corporation, at (866) 470-3800 (US toll-free) and (212) 430-3774 (collect).

Goldman, Sachs & Co. and Banc of America Securities LLC are the Dealer Managers and Solicitation Agents for the Offers. Questions regarding the Offers may be directed to Goldman, Sachs & Co., Liability Management Group at (800) 828-3182 (toll-free) and (212) 357-4692 (collect) or to Banc of America Securities LLC, Debt Advisory Services at (888) 292-0070 (toll-free) or (980) 388-9217 (collect).

About Duane Reade

Founded in 1960, Duane Reade is the largest drug store chain in New York City, offering a wide variety of prescription and over-the-counter drugs, health and beauty care items, cosmetics, greeting cards, convenience foods and photofinishing. As of June 27, 2009, the Company operated 253 stores.

The statements in this release contain forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. These forward-looking statements relate to future events or our future financial performance with respect to our financial condition, results of operations, business plans and strategies, operating efficiencies or synergies, competitive positions, growth opportunities for existing products such as private label merchandise, plans and objectives of management, capital expenditures, growth and maturation of our stores and other matters. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. Those risks include, among other things, the ability of the Issuers to complete the financing transactions (including the Equity Investment and the New Notes Offerings) necessary to consummate the Offers, the national economic climate, economic conditions and employment levels in the New York greater metropolitan area, the strength of the economy in general, the competitive environment in the drug store industry in general and in the New York metropolitan area, the ability to open and operate new stores, the continued efforts by payers and government agencies to reduce prescription reimbursement rates and prescription drug benefits, changes in federal and state laws and regulations, including the potential impact of changes in regulations surrounding the importation of pharmaceuticals from foreign countries and changes in laws governing minimum wage requirements, changes in the Company's operating strategy, capital expenditure plans or development plans, the Company's ability to successfully execute its business plan, the Company's ability to attract, hire and retain qualified pharmacy and other personnel, the Company's significant indebtedness, labor disturbances, the continued impact of, or new occurrences of, terrorist attacks in the New York greater metropolitan area and any actions that may be taken in anticipation or response, demographic changes, the Company's ability to limit fraud and inventory shrink, the results of the Company's legal proceedings and recalls of pharmaceutical products due to health concerns or other reasons. Those and other risks are more fully described in Duane Reade Holdings, Inc.'s reports filed with the SEC from time to time, including its annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Except to the extent otherwise required by federal securities laws, the Company does not undertake to publicly update or revise any forward-looking statements.

Tender Total Consideration Consideration Principal per $1,000 per $1,000 CUSIP Amount Security Principal Consent Principal Number Outstanding Description Amount Payment Amount ------ ----------- ----------- ------------- ------- ------------- 263578AG1/ Floating Rate 263578AJ5 $210,000,000 Notes $970 $30 $1,000 Subordinated 263578AE6 $195,000,000 Notes $845 $30 $875

SOURCE Duane Reade Holdings, Inc.
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