Philadelphia — Rite Aid Corp. (NYSE: RAD) has filed for Chapter 11 bankruptcy protection and has received financial commitments totaling roughly $3.4 billion from lenders to support business operations as the company works to restructure its debt.
The Philadelphia-based pharmacy and convenience store chain did not say whether it would immediately close any stores as a direct result of this filing, just that it would continue “assessing its footprint and closing underperforming stores.” However, in September, The Wall Street Journal reported that Rite Aid had proposed to its creditors a restructuring and rightsizing plan that would involve closing 400 to 500 of its 2,100 or so stores nationwide.
The bankruptcy filing has long been expected within the industry, as Rite Aid’s position has grown more precarious in the wake of numerous lawsuits alleging the pharmacy’s role in supplying opioid drugs that contributed to overdose deaths. That legal activity reached its crescendo earlier this year when the U.S. Justice Department formally lodged a complaint against Rite Aid. According to CNN, the government alleged at that time that Rite Aid had “knowingly filled unlawful prescriptions for controlled substances.”
According to CNBC, Rite Aid ended its most recent fiscal quarter on June 3 with revenue of roughly $5.65 billion, down 7.3 percent from $6.01 billion on a year-over-year basis. The New York Post reports that Rite Aid’s total debt load currently exceeds $8.6 billion. Other news organizations have cited overall slumping sales due to factors such as slowing demand for COVID-19 vaccines as another contributing force behind the filing.
Rite Aid, which filed for protection in the U.S. Bankruptcy Court for the District of New Jersey, has appointed Jeffrey Stein as its new CEO. Stein, a member of Rite Aid’s board of directors, replaces interim CEO Elizabeth Burr and will oversee the debt restructuring process as an executive with “significant experience in supporting companies that are undergoing financial restructurings.”
Kirkland & Ellis LLP is providing legal advisory services to Rite Aid during the bankruptcy proceedings. Guggenheim Securities is serving as investment banker, and Alvarez & Marsal is serving as transformation officer and financial advisor to the company.
Rite Aid was founded in Scranton, Pennsylvania, in 1962 and currently employs about 45,000 people across 17 states. The company’s stock price closed at 65 cents per share on Friday, Oct. 13, down from about $4 per share a year ago.
— Taylor Williams