After weeks of speculation about its go-forward strategy, Rite Aid Corp. has announced that it has filed for Chapter 11 bankruptcy protection to accelerate its ongoing business transformation. This comes amid pressure exerted by lower COVID-19-related sales and opioid settlement charges.
He will help supervise a restructuring plan designed to significantly reduce Rite Aid’s debt, increase financial flexibility and enable it to execute key initiatives, the company noted.
A court-supervised process, the company added, provides an orderly and efficient way for Rite Aid to build consensus for and finalize the agreement in principle it has reached with certain senior secured noteholders on a financial restructuring plan, resolve litigation claims in an equitable manner, and access additional liquidity. It will also facilitate accelerating the company’s store footprint optimization plan and acquiring Rite Aid-owned Elixir Solutions, a pharmacy benefits and services company, by MedImpact, itself a pharmacy benefits management firm.
Under terms of its agreement with Rite Aid, MedImpact will serve as stalking horse bidder under section 363 of the United States Bankruptcy Code. As such, the proposed transaction is subject to higher and better offers, court approval and other customary conditions.
Rite Aid pointed out that it has received a commitment for $3.45 billion in new financing from certain of its lenders. The financing is expected to provide sufficient liquidity to support the company throughout the Chapter 11 process.
Under bankruptcy protection, Rite Aid intends to close additional underperforming stores although the company didn’t provide a number and suggested it was still in the process of determining which locations to shutter. Rite Aid asserted that it is making every effort to ensure customers of impacted stores have access to health services, whether at another Rite Aid or a nearby pharmacy and will work to transfer prescriptions accordingly so that there is no disruption of services. The company also plans to transfer associates at impacted stores to other Rite Aid locations where possible.
Rite Aid also announced that it had appointed Carrie Teffner and Paul Keglevic to its board. Teffner has served as executive vp and CFO at several Fortune 500 companies and is on the boards of DXC Technology, International Data Group and BFA Industries. Keglevic has served as CEO of Energy Future Holdings and is on the boards of WeWork, Evergy and Envision Healthcare.
Prior to his last venture, Stein was a co-founder and principal of Durham Asset Management LLC, a global event-driven distressed debt and special situations equity asset management firm. He takes over from Elizabeth “Busy” Burr, who has served as Interim CEO since January 2023. Ms. Burr will continue in her role as a Director on the Company’s Board
“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,” Stein said, announcing the bankruptcy filing. “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. In doing so, we will be even better able to deliver the healthcare products and services our customers and their families rely on, now and into the future.”
Stein said Rite Aid remains “focused on serving our customers and communities, and we are grateful that they continue to choose our stores and pharmacies for their healthcare needs. The court-supervised process provides Rite Aid with legal tools to accelerate our footprint optimization in an efficient and orderly manner. We look forward to working closely with our landlords to determine the best path forward for each of our stores.”
