Rite Aid filed for Chapter 11 bankruptcy on Sunday as the U.S. pharmacy chain began a massive restructuring to reduce its mounting debt amid countless lawsuits and dwindling sales.
As part of the filing, the Philadelphia-based company received a commitment of $3.45 billion in new financing, which is expected to provide liquidity as it faces more than $8.6 billion in debt.
The bankruptcy process will also allow Rite Aid to resolve more than a thousand federal, state and local lawsuits alleging an oversupply of opioids “in an equitable manner,” the company said in a statement.
Rite Aid also named a new CEO and chief restructuring officer on Sunday as the bankruptcy process moves forward.
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 served 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.
“By doing so, we will be better able to offer the healthcare products and services our customers and their families rely on, now and in the future.”
The bankruptcy process will give Rite Aid the ability to resolve litigated claims “equitably,” the company said.REUTERS
Rite Aid will close up to 500 of its underperforming stores, a significant portion of its more than 2,100 pharmacies nationwide.
The company proposed selling the chains or allowing creditors to take over, but said it would transfer employees at affected stores to other locations when possible.
Rite Aid also reached an agreement in principle with some of its senior secured bondholders that would significantly reduce its debt.
Additionally, the company entered into an agreement with independent pharmaceutical company MedImpact Healthcare Systems to acquire Rite Aid’s Elixir Solutions business, serving as its “stalking bidder” in a court-supervised sale process.
The pharmacy chain’s sales have plummeted since the Justice Department filed its lawsuit in March, accusing the pharmacy chain of missing “red flags” by illegally filling hundreds of thousands of prescriptions for controlled substances.
During the most recent quarter ending June 3, revenue fell to $5.6 billion, down from $6.01 billion in the same period a year earlier, NBC News reported.
Net losses widened to $306.7 million, or $5.56 per share, compared with a net loss of $110.2 million, or $2.03 per share, in the same period a year earlier.
As of June, Rite Aid had total debt of $8.6 billion, part of which will need to be paid off 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.
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