- October 16, 2023
- Posted by: legaleseblogger
- Category: Related News
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Rite Aid Files for Bankruptcy Protection and Seeks Restructuring Amid Opioid Lawsuits
Rite Aid, a leading retail pharmacy chain, has recently filed for bankruptcy protection under Chapter 11 of the US Bankruptcy Code in an effort to restructure and reduce its debt caused by opioid-related lawsuits. This voluntary court-supervised process will allow the company to address its financial challenges and continue operating its retail stores while serving patients both in-store and online.1
The company’s commitment to improving health outcomes and fulfilling its purpose of helping people achieve whole health for life remains unwavering, as stated in a news release.1
Image credit: Tyler Olson – stock.adobe.com
By initiating the Chapter 11 process, Rite Aid aims to secure an agreement with its senior secured noteholders, pursue its store footprint optimization plan, access additional liquidity, and fairly resolve the ongoing litigation claims related to opioids.1
The agreement in principle with certain senior secured noteholders will significantly reduce the company’s debt burden, thanks to favorable terms relating to the financial restructuring. Furthermore, Rite Aid has secured a commitment for $3.45 billion in new financing from lenders to support its operations throughout the Chapter 11 proceedings.1
To optimize its store footprint, Rite Aid intends to assess its retail locations and close underperforming storefronts. This strategic measure will result in reduced rent expenses and strengthened financial performance, as mentioned in the company’s press release.
Despite the closure of select stores, Rite Aid assures that affected customers will have access to alternative health services either through other Rite Aid locations or nearby pharmacies. Prescription transfers to preferred locations will be facilitated to ensure uninterrupted services. While several hundred store closures are expected, specific details regarding the affected stores have not been disclosed. Employees will be offered transfers to other Rite Aid locations.1
As part of its restructuring process, Rite Aid has swiftly appointed Jeffrey S. Stein as the CEO, Chief Restructuring Officer, and a member of the company’s Board of Directors. Stein brings valuable expertise in supporting companies undergoing business transformations and financial restructurings, according to the press release.1
Stein shared his optimism about Rite Aid’s future prospects, stating, “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. 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 healthcare products and services our customers and their families rely on, now and into the future.”1
In addition, Rite Aid announced that MedImpact will serve as the “stalking horse bidder” in a court-supervised sale process. MedImpact will acquire Rite Aid’s Elixir Solutions business, while Elixir Solutions will continue to operate normally.1
This bankruptcy filing is not the first time Rite Aid has faced financial challenges due to lawsuits related to opioid prescriptions. Back in 2022, the company reached a settlement with the state of West Virginia, agreeing to pay up to $30 million to resolve the matter.2
In March 2023, former employees blew the whistle on Rite Aid, claiming that the company had filled “at least hundreds of thousands” of illegal prescriptions. However, Rite Aid dismissed these allegations as “hyperbolic.”2
Rite Aid has also filed customary motions to the court, seeking permission to continue paying employee wages, salaries, benefits, as well as payments to vendors and suppliers without any disruptions.1
In closing, Rite Aid expressed gratitude towards its customers, associates, partners, suppliers, and vendors for their unwavering support during this challenging period, as highlighted by Stein in the press release.1
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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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