US pharmacy chain Rite Aid Corp. filed for bankruptcy in an effort to close unprofitable stores, address lawsuits over its role in the opioid pandemic and rework a debt load of roughly $4 billion.
(Bloomberg) — US pharmacy chain Rite Aid Corp. filed for bankruptcy in an effort to close unprofitable stores, address lawsuits over its role in the opioid pandemic and rework a debt load of roughly $4 billion.
The company, which began in 1962 as a single drugstore in Scranton, Pennsylvania, employs around 45,000 people across more than 2,000 locations. In 2015, it entered the pharmacy benefit manager business, serving as a middleman between insurers and patients that helps process prescriptions. It’s now planning to sell that business, called Elixir, in bankruptcy.
Hit hard by the pandemic, Rite Aid began a series of debt swaps and pay-downs between 2020 and 2022 to try to cut its interest expenses, according to court papers. It also closed around 200 underperforming stores and entered sale-leaseback deals.
To fund itself during the Chapter 11 process, Rite Aid reached a deal with lenders for $3.45 billion in financing, and entered an agreement for Elixir to be acquired by PBM company MedImpact Healthcare Systems Inc., according to a statement.
MedImpact has agreed to pay $575 million cash plus for Elixir, plus assume certain liabilities, court papers show. The bid serves as a floor for other offers in bankruptcy. Any deal is subject to court approval.
Rite Aid had been battling opioid claims, including the Justice Department arguing that Rite Aid knowingly filled hundreds of thousands of unlawful prescriptions for controlled substances.
Other national pharmacy chains, including CVS Health Corp. and Walgreens Boots Alliance Inc., have already agreed to pay big sums for their involvement in the opioid epidemic. The two chains settled late last year with more than a dozen states, agreeing to pay more than $10 billion.
Rite Aid appointed Jeffrey Stein chief executive officer and chief restructuring officer. He has previously held similar roles in distressed companies including GWG Holdings Inc., Whiting Petroleum, Westmoreland Coal Co. and Philadelphia Energy Solutions LLC.
The company estimated it had more than 100,000 creditors and said funds would be available for distribution to unsecured creditors. McKesson Corp. is the largest unsecured, non-insider creditor, with trade-payable claims of about $667.6 million, according to the documents.
Rite Aid filed its bankruptcy petitions in Trenton, New Jersey, on Sunday. It is scheduled to appear for the first time in front of US Bankruptcy Judge Michael Kaplan at 1 p.m. Monday.
Rite Aid is working with A&G Realty Partners to shutter more stores to cut down on rent costs of its more than 2,100 locations as part of the turnaround efforts.
The case is Rite Aid Corp., 23-18993, US Bankruptcy Court for the District of New Jersey.
–With assistance from Catherine Bosley.
(Updates with additional details throughout.)
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