After six weeks of speculation and negotiation, Rite Aid has officially filed for Chapter 11 bankruptcy and has reached a tentative agreement with its largest lenders on a financial restructuring plan. Rite Aid also announced the appointment of Jeffrey Stein, Founder of the financial advisory firm Stein Partners, as its new CEO, Chief Restructuring Officer and a member of the company’s board of directors, effective immediately.
Both store and online operations will continue as normal throughout the bankruptcy process, and a group of Rite Aid’s lenders has committed $3.45 billion in new financing to ensure the company has enough liquidity to remain in operation throughout the proceedings.
“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 a statement. “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. 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.”
Rite Aid subsidiary Elixir Insurance, a pharmacy benefit manager, is not included in the Chapter 11 filing, but its specialty pharmacy counterpart Elixir Solutions is. As such, Rite Aid has agreed to sell Elixir Solutions to MedImpact Healthcare Systems. MedImpact will serve as the “stalking horse bidder” in a court-supervised sale process as part of the bankruptcy proceedings. Both Elixir Solutions and Elixir Insurance will continue normal operations throughout the process.
Rite Aid’s Chapter 11 filing has been a long time coming. News of a potential bankruptcy first surfaced in late August 2023, prompted in large part by the $3.3 billion in debt Rite Aid incurred as part of federal lawsuits related to its role in the sale of opioids. While three pharmaceutical manufacturers — Purdue Pharma, Endo International and Mallinckrodt — have filed for bankruptcy to resolve opioid litigation, Rite Aid is now the first pharmacy chain to seek Chapter 11 protection. Walgreens and CVS reached financial settlements in similar suits in November 2022.
On Oct. 5, Rite Aid announced that it had received a notice of non-compliance from the New York Stock Exchange because its stock price had fallen below the minimum standard of at least $1 per share for too long. The retailer has now entered a “cure period” but remains listed.
The Wall Street Journal previously reported that ongoing negotiations with Rite Aid’s creditors included plans to liquidate as many as 400 to 500 of its 2,100 stores. While Rite Aid didn’t detail specific store closure plans in its bankruptcy announcement, an evaluation of its store portfolio is on the docket, and the company said that it does plan to close underperforming stores. A&G Realty Partners is assisting the company in its store closing and lease restructuring efforts.
“The court-supervised process provides Rite Aid with legal tools to accelerate our footprint optimization in an efficient and orderly manner,” said Stein. “We look forward to working closely with our landlords to determine the best path forward for each of our stores.”