Rite Aid files for Chapter 11 bankruptcy, names new CEO
PHILADELPHIA (NEXSTAR) — Major U.S. pharmacy chain Rite Aid said Sunday that it has filed for bankruptcy and obtained $3.45 billion in fresh financing as it carries out a restructuring plan while coping with falling sales and opioid-related lawsuits.
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In 2022, Rite Aid settled for up to $30 million to resolve lawsuits alleging pharmacies contributed to an oversupply of prescription opioids. It said it had reached an agreement with its creditors on a financial restructuring plan to cut its debt and position itself for future growth and that the bankruptcy filing was part of that process.
The plan will “significantly reduce the company’s debt” while helping to “resolve litigation claims in an equitable manner,” Rite Aid said.
In March, the Justice Department filed a complaint against Rite Aid, alleging it knowingly filled hundreds of thousands of unlawful prescriptions for controlled substances from May 2014 to June 2019. It also accused pharmacists and the company of ignoring “red flags” indicating the prescriptions were illegal.
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The Justice Department acted after three whistleblowers who had worked at Rite Aid pharmacies filed a complaint.
Jeffrey Stein, who heads a financial advisory firm, was appointed Rite Aid’s CEO as of Sunday, replacing Elizabeth Burr, who was interim CEO and remains on Rite Aid’s board.
Earlier this month, Rite Aid notified the New York Stock Exchange that it was not in compliance with listing standards. During a grace period, the company’s stock continues to be listed and traded. Over the past five years, Rite Aid’s stock price has dropped more than 96%.
The bankruptcy filing in New Jersey and noncompliance with listing standards would not affect the company’s business operations or its U.S. Securities and Exchange Commission reporting requirements, it said.
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Rite Aid said it was arranging for payment of wages and other costs as usual, though some “underperforming” stores among its more than 2,100 pharmacies in 17 states will be closed.
It earlier reported that its revenue fell to $5.7 billion in the fiscal quarter that ended June 3, down from $6.0 billion a year earlier, logging a net loss of $306.7 million.
Rite Aid says it has also received $3.45 billion in new investing from lenders and appointed Jeffrey S. Stein as chief executive officer, chief restructuring officer, and a member of the company’s board of directors.
“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. “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 says the company will work with landlords to assess their footprint across the country.
“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. We thank our associates for their ongoing hard work and dedication, and we extend our gratitude to our partners, suppliers and vendors for their continued support.”
The Associated Press contributed to this report.
