NATIONAL NEWS

Rite Aid seeks Chapter 11 bankruptcy protection as it deals with lawsuits and losses

Oct 16, 2023, 12:29 PM

NEW YORK, NEW YORK - OCTOBER 16: A Rite-Aid is seen on October 16, 2023 in the Crown Heights neighb...

NEW YORK, NEW YORK - OCTOBER 16: A Rite-Aid is seen on October 16, 2023 in the Crown Heights neighborhood of the Brooklyn borough of New York City. Rite Aid, one of the largest pharmacy chains in the country, has filed for bankruptcy and plans to close a number of stores across the United States amid slumping sales and lawsuits related to accusations that it helped fuel the opioid epidemic. (Photo by Michael M. Santiago/Getty Images)

(Photo by Michael M. Santiago/Getty Images)

Rite Aid has filed for bankruptcy protection and plans to sell part of its business as it attempts to restructure while dealing with losses and opioid-related lawsuits.

The company said Rite Aid stores will continue to fill prescriptions, and customers will still be able to visit its locations or shop online while it goes through its voluntary Chapter 11 process. But that process also will allow it to speed up its plan to close underperforming stores.

Going through Chapter 11 will help “significantly reduce the company’s debt” while helping to “resolve litigation claims in an equitable manner,” Rite Aid late Sunday.

Rite Aid Corp. said in its federal bankruptcy filing that it runs more than 2,000 stores. Most of its locations are on the East and West Coasts.

The Philadelphia company, which is marking its 60th birthday this year, has posted annual losses for several years and has been cutting costs and closing stores as it dealt with long-standing financial challenges. It has said it expects a net loss of as much as $680 million in the current fiscal year, which will end next spring.

Amazon, Rite Aid cap purchase of emergency contraceptives

The company, like its rivals, also faces financial risk from lawsuits over opioid prescriptions. Rite Aid already has reached several settlements, including one announced last year with the state of West Virginia for up to $30 million.

In March, the U.S. Justice Department intervened in a whistleblower lawsuit brought by former employees under the False Claims Act. Federal officials said in a statement that the drugstore chain filled “at least hundreds of thousands” of illegal prescriptions for drugs including opioids.

Rite Aid called the government’s claims “hyperbolic” in a subsequent motion to dismiss. The company said facts alleged in the case actually showed it exceeded regulatory requirements for diversion control.

Drugstores also have been dealing with several issues that frustrate customers. They’ve handled prescription drug shortages, and they have struggled to fill their stores with enough pharmacists and technicians to run the pharmacies. Rivals CVS and Walgreens both have dealt with walkouts by pharmacy employees concerned about their growing workloads and lack of help.

The stores also have had to weather tight prescription reimbursement and waning COVID-19 vaccine and testing business in recent quarters. Plus online competitors like the retail giant Amazon have hurt sales sales of consumer goods found outside the pharmacy areas of their stores.

Rite Aid’s larger competitors like CVS and Walgreens, which each run several thousand more locations, have moved more aggressively into health care, opening clinics and adding other sources of revenue.

Walgreens walkout: Your pharmacy might be closed next week

Deutsche Bank analyst George Hill said in an August note that Rite Aid operates on a much thinner profit margin than its competitors and while it can pay costs to service its debt, it won’t be able to cover principal payments “based on the current trajectory of the business.”

The company’s filing in U.S. Bankruptcy Court in New Jersey listed $8.6 billion in total debts and $7.6 billion in assets.

Rite Aid said Sunday that it had reached an agreement with some key creditors on a financial restructuring plan to cut its debt. The company also said it obtained $3.45 billion in fresh financing from some of its lenders, which will help support the company through the Chapter 11 process.

Rite Aid says it does not know yet which stores it will close, but it will transfer workers to other Rite Aid locations where possible.

Gabelli Funds portfolio manager Jeff Jonas expects the company to close several hundred locations. He noted that this could ease some pressure on drugstores struggling to find workers.

“All those people will get new jobs immediately,” he said. “You hate to say that someone’s bankruptcy is a positive, but it kind of is.”

Rite Aid also said Sunday that it reached a deal to sell its small pharmacy benefits manager, Elixir, to MedImpact Healthcare Systems. Elixir runs prescription drug coverage and a specialty pharmacy among other services.

Rite Aid said MedImpact will serve as the “stalking horse bidder” in a court-supervised sale process.

The company also said that Jeffrey Stein, who heads a financial advisory firm, was named CEO, replacing interim leader Elizabeth Burr. She had replaced Heyward Donigan, who left in January.

Rite Aid said Stein has experience working with companies that are undergoing financial restructuring.

A few years ago, Rite Aid propped up its share price with a 1-for-20 reverse stock split that took more than a billion shares off the market. But the share price has slid for most of this year and tumbled back below $1 in August. The stock last traded at roughly 65 cents.

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.

Walgreens attempted to buy Rite Aid for about $9.4 billion in a deal announced in 2015. But the larger drugstore chain scaled back its ambition a couple years later and bought only a chunk of Rite Aid, around 1,900 stores, to get the deal past antitrust regulators.

In 2018, Rite Aid shares plunged after the company called off a separate merger with the grocer Albertsons, which is currently trying to merge with another grocer, Kroger.

____

Murphy reported from Indianapolis. Kurtenbach reported from Bangkok. AP Business Writer Josh Funk also contributed to this report from Omaha, Nebraska.

KSL 5 TV Live

National News

Researchers were able to locate a specific gene variant correlated with some people's weight gain, ...

Madeline Holcombe, CNN

Researchers have found a ‘clear genetic trigger for obesity’ that applies to some people

Obesity isn’t just a matter of food and exercise — it may be in your genetic code, according to new research.

5 hours ago

TikTok ramps up attacks on Biden administration in challenging prospective ban, and seen here, a vi...

Brian Fung, CNN

TikTok ramps up attacks on Biden administration in challenging prospective ban

TikTok ramped up its attacks on the Biden administration Thursday over a law that could ban the popular app from the United States, arguing in a court filing that US TikTok users could be forced to live on an “island” of content disconnected from the rest of the world if the platform is forced to find a new owner.

6 hours ago

Trucks have been delivering a nonstop stream of packages from Temu to a home in the western suburbs...

Tara Molina, WBBM

An Illinois family keeps getting packages they never ordered from Temu

Trucks have been delivering a nonstop stream of packages from Temu to a home in the Illinois suburbs lately, but the family is not ordering anything.

8 hours ago

Robert F. Kennedy Jr. apologized to members of his family who objected to a new TV ad released Sund...

Meg Kinnard, Associated Press

Robert F. Kennedy Jr. fails to qualify for CNN’s debate

Robert F. Kennedy Jr. has failed to qualify for next week’s debate in Atlanta. Host network CNN said Thursday the independent presidential candidate fell short of benchmarks both for state ballot qualification and polling

11 hours ago

Dave Drewry's pet donkey, Diesel disappeared in California five years ago and he’s been spotted l...

Scottie Andrew, CNN

A pet donkey disappeared in California five years ago was spotted living with a herd of wild elk

For years, Diesel's owners assumed the worst happened to their donkey after he ran away. But, a hunter found a particular sight when he was hunting deer earlier this year.

12 hours ago

In this still image taken from video of the Office of the New York Governor, Gov. Kathy Hochul sign...

Anthony Izaguirre

New York moves to limit ‘addictive’ social media feeds for kids

New York's governor has signed a bill that would allow parents to block their children from getting social media posts suggested by a platform’s algorithm.

13 hours ago

Sponsored Articles

Photo courtesy of Artists of Ballet West...

Ballet West

The rising demand for ballet tickets: why they’re harder to get

Ballet West’s box office is experiencing demand they’ve never seen before, leaving many interested patrons unable to secure tickets they want.

Electrician repairing ceiling fan with lamps indoors...

Lighting Design

Stay cool this summer with ceiling fans

When used correctly, ceiling fans help circulate cool and warm air. They can also help you save on utilities.

Side view at diverse group of children sitting in row at school classroom and using laptops...

PC Laptops

5 internet safety tips for kids

Read these tips about internet safety for kids so that your children can use this tool for learning and discovery in positive ways.

Women hold card for scanning key card to access Photocopier Security system concept...

Les Olson

Why printer security should be top of mind for your business

Connected printers have vulnerable endpoints that are an easy target for cyber thieves. Protect your business with these tips.

Modern chandelier hanging from a white slanted ceiling with windows in the backgruond...

Lighting Design

Light up your home with these top lighting trends for 2024

Check out the latest lighting design trends for 2024 and tips on how you can incorporate them into your home.

Technician woman fixing hardware of desktop computer. Close up....

PC Laptops

Tips for hassle-free computer repairs

Experiencing a glitch in your computer can be frustrating, but with these tips you can have your computer repaired without the stress.

Rite Aid seeks Chapter 11 bankruptcy protection as it deals with lawsuits and losses