Drug retailer Rite Aid files for bankruptcy, gets $3.45B commitment

Rite Aid filed for Chapter 11 bankruptcy Sunday as the US chain pharmacy began massive restructuring to reduce its mounting debt amid countless lawsuits and dwindling sales. 

The Philadelphia-based company was awarded a commitment for $3.45 billion in new financing — which is expected to provide liquidity as it faces more than $8.6 billion in debt — as part of the filing. 

The bankruptcy process will also allow Rite Aid to resolve over a thousand federal, state and local lawsuits alleging it oversupplied opioids in an “equitable manner,” the company said in a release.

Rite Aid also appointed a new CEO and chief restructuring officer Sunday as it moves through the bankruptcy proceedings.

Jeffrey Stein — who founded Stein Advisors, a financial advisory firm that focuses on fixing troubled companies — will replace Elizabeth Burr, a Rite Aid board member who had been serving as interim CEO since January.

“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,” Stein said in a statement.

“In doing so, we will be even better able to deliver the healthcare products and services our customers and their families rely on – now and into the future.”

Rite Aid will close as many as 500 of its underperforming stores — a significant portion of its more than 2,100 drugstores across the nation.

The company proposed either selling the chains or allowing creditors to take over, but said it would transfer employees at impacted stores to other locations where possible.

Rite Aid has also reached an in-principle agreement with some of its senior secured noteholders that would significantly reduce its debt.

Additionally, the company entered into an agreement with independent pharmacy company MedImpact Healthcare Systems to acquire Rite Aid’s Elixir Solutions business, serving as its “stalking horse bidder” in a court-supervised sale process.

The drug store chain’s sales have nosedived since the Department of Justice filed its suit in March, accusing the pharmacy chain of missing “red flags” as it illegally filled hundreds of thousands of prescriptions for controlled substances.

During its most recent quarter finishing on June 3, revenue fell to $5.6 billion, down from $6.01 billion in the year-ago period, NBC News reported.

Net losses widened to $306.7 million, or $5.56 per share, compared to a net loss of $110.2 million, or $2.03 per share, in the same period a year earlier. 

As of June, Rite Aid owed a total debt of $8.6 billion, some of which is due to be repaid in 2025.

The company listed estimated assets and liabilities in the range of $1 billion to $10 billion in a court filing with the U.S. Bankruptcy Court for the District of New Jersey.

With Post Wires