Weighed Down By Billions In Debt And Opioid Lawsuits, Rite Aid Files For Bankruptcy
Pharmacy chain Rite Aid filed for Chapter 11 bankruptcy and plans to close an unspecified number of stores. Rite Aid has more than 2,300 stores in 17 states.
Rite Aid has obtained more than $3.4B in bankruptcy financing and tapped Jeffrey Stein as its new CEO, replacing interim CEO Elizabeth Burr. Stein is the founder of Stein Advisors, which specializes in taking companies through restructurings.
The company is weighed down by about $3.3B in debt and competes with the larger chains Walgreens and CVS.
Rite Aid is also the target of more than 1,000 lawsuits in both state and federal courts, alleging that unlawful prescription practices contributed to the opioid crisis that has claimed roughly a million lives over the last two decades. The company has denied those allegations.
Earlier this year, the Department of Justice brought a complaint against the company alleging that it not only prescribed opioids illegally but also intentionally deleted internal notes about suspicious prescribers.
The company has posted losses for a number of years and has been cutting costs and closing stores to deal with its problems.
In recent years, the company has also been the target of two failed takeover attempts by Albertsons Cos. and Walgreens. In 2017, Walgreens Boots Alliance proposed a $10B takeover that fell through. In 2018, Walgreens purchased half of all Rite Aid locations — about 1,900 stores and three distribution centers — for $4.4B.
Rite Aid's largest creditors include pharmaceutical company McKesson Corp. and insurer Humana, The New York Times reports.
"I think Chapter 11 is really the only option for somebody like a Rite Aid to get all of this settled,” Debtwire Global Head of Legal and Restructuring Sarah Foss told the NYT.
