Rite Aid Initiates Voluntary Chapter 11 Process to Aid Company Financial Restructuring

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Rite Aid filed for bankruptcy protection and said it plans to close several hundred retail stores.

Rite Aid has filed for bankruptcy protection under a voluntary court-supervised process through Chapter 11 of the US Bankruptcy Code. The company said it intends to restructure and reduce debt caused by opioid-related lawsuits.1

The Rite Aid Corporation announced that retail Rite Aid shops will continue to fill prescriptions and serve patients in store and online as it enters the Chapter 11 process.1

“The Company remains committed to improving health outcomes and delivering on its purpose to help people achieve whole health for life,” said the corporation in a news release.1

Pharmacy shelves, interior

Image credit: Tyler Olson - stock.adobe.com

Rite Aid noted that the Chapter 11 process will aid the agreement the company reached with its senior secured noteholders, accelerate the company’s store footprint optimization plan, access additional liquidity, and help resolve litigation claims equitably.1

The agreement in principle reached with some of the company’s senior secured noteholders would significantly reduce the debt Rite Aid is facing. The corporation reported that this is due to the terms of the financial restructuring. Rite Aid announced that they have received a commitment for $3.45 billion in new financing from lenders to support the company throughout the Chapter 11 process.1

To optimize the company’s store footprint, Rite Aid intends to assess its footprint and close retail storefronts that are underperforming. This will allow a reduction of rent expenses and strengthen the overall financial performance, according to the company press release.1

Rite Aid said that despite the closing of certain stores, they will ensure that customers affected will have access to other health services either through another Rite Aid or a nearby pharmacy. The company intends to transfer prescriptions to the preferred locations, without a disruption of services. The company expects to close several hundred locations but does not know the certain stores yet. Employees will be transferred to other Rite Aid stores.1

An additional change Rite Aid announced was the immediate appointment of Jeffrey S. Stein as the CEO, Chief Restructuring Officer, and a member of the company’s Board of Directors. Stein has experience in providing support to companies that are underdoing business transformations and financial restructurings, according to the press release.1

“Rite Aid has served customers and communities across our country for more than 60 years, and the important actions we are taking today will enable us to move ahead as a stronger company,” said Stein in the press release. “With the support of our lenders, we look forward to strengthening our financial foundation, advancing our transformation initiatives, and accelerating the execution of our turnaround strategy. In doing so, we will be even better able to deliver the health care products and services our customers and their families rely on, now and into the future.”1

Rite Aid also said that MedImpact will now function as the “stalking horse bidder” in a court-supervise sale process. MedImpact will obtain Rite Aid’s Elixir Solutions business, although Elixir Solutions will remain to operate normally.1

This is not the first time Rite Aid has faced financial risk from lawsuits over opioid prescriptions. In 2022, Rite Aid was reported to reach a settlement with the state of West Virginia for up to $30 million.2

In addition, in March 2023 a whistleblower lawsuit from former employees announced that the company has filled “at least hundreds of thousands” of illegal prescriptions. However, Rite Aid dismissed the claims, calling them “hyperbolic.”2

Additional customary motions were filed by Rite Aid to the court to continue the wages, salaries, and benefits to employees without disruptions, along with the payment of vendors and suppliers.1

“We remain focused on serving our customers and communities, and we are grateful that they continue to choose our stores and pharmacies for their healthcare needs. We thank our associates for their ongoing hard work and dedication, and we extend our gratitude to our partners, suppliers and vendors for their continued support,” said Stein, in a press release.1

References

1. Rite Aid Takes Steps to Accelerate Transformation and Position Company for Long-Term Success. Rite Aid. News release. October 15, 2023. Accessed October 16, 2023. https://news.riteaid.com/press-releases/press-release-details/2023/Rite-Aid-Takes-Steps-to-Accelerate-Transformation-and-Position-Company-for-Long-Term-Success/default.aspx.

2. Rite Aid seeks Chapter 11 bankruptcy protection as it deals with lawsuits and losses. Associated Press. News release. October 16, 2023. Accessed October 16, 2023. https://apnews.com/article/rite-pharmacy-bankruptcy-f80c3d231946d675b03e4e797f627fa6.

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