In a move necessitated by financial difficulties, Rite Aid has initiated bankruptcy proceedings in the United States. The company revealed in a statement that it had secured a commitment of $3.45 billion in new financing from select lenders as part of a court-monitored process. However, the specifics of this financing arrangement were not disclosed.
Additionally, Rite Aid has successfully negotiated a restructuring agreement with holders of its senior secured notes. In conjunction with this, the company has appointed Jeffrey S. Stein as its new chief executive officer, citing his expertise in revitalizing ailing businesses. The statement further expressed optimism that this new financing would furnish the company with the necessary liquidity to navigate the bankruptcy process.
The retail chain, headquartered in Philadelphia, Pennsylvania, has been grappling with a substantial long-term debt exceeding $3 billion. The situation was exacerbated by allegations from the U.S. government that it had dispensed unlawful prescriptions for opioid painkillers.
Downgraded to Junk Status
S&P Global Ratings, in August, downgraded Rite Aid further into junk territory. The rationale behind this downgrade was the looming maturity of a substantial debt load in 2025 and the potential for significant financial liabilities stemming from opioid-related lawsuits.
It’s noteworthy that other national pharmacy chains, such as CVS Health Corp. and Walgreens Boots Alliance Inc., have already settled with multiple U.S. states, agreeing to pay hefty sums to address their involvement in the opioid epidemic. These settlements, reached late last year, collectively amounted to over $10 billion.
In its Chapter 11 bankruptcy filing on October 15, Rite Aid disclosed its assets and liabilities to be within the range of $1 billion to $10 billion. The company also noted that it had more than 100,000 creditors and pledged to make funds available for distribution to unsecured creditors.
Among the notable unsecured, non-insider creditors is McKesson Corp., with trade-payable claims totaling approximately $667.6 million, according to official documents.
Rite Aid has articulated its intention to finalize the restructuring agreement within the framework of the court-supervised process and implement it promptly. Additionally, the company plans to divest its Elixir Solutions unit, which will be sold to MedImpact Healthcare Systems Inc.
