Oak Hill Recapping Duane Reade

Oak Hill Capital Partners has agreed to make a $125 million preferred equity investment in Duane Reade Holdings Inc., a drug store chain that Oak Hill bought for $700 million in 2004.

PRESS RELEASE
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:

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

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.