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NEW YORK — Last week a U.S. bankruptcy judge approved Rite Aid’s restructuring plan, allowing the pharmacy chain to trim down its debt by $2 billion and give control to a group of lenders.
U.S. Bankruptcy Judge Michael Kaplan approved Rite Aid’s bankruptcy plan at a court hearing in Trenton, New Jersey, saying that the restructuring had saved the company from having to shut down and liquidate operations.
Before Kaplan’s ruling, Rite Aid attorney Aparna Yenamandra told the judge that 28,000 jobs could be lost if the restructuring deal was not approved.
“If we can’t get it done now, we’re simply never going to get it done,” Yenamandra said.
Rite Aid has said the settlements and broader restructuring plan keeps open critical neighborhood pharmacies and will save thousands of jobs.
According to a source, once the plan is finalized the retailer will be left with 1300 stores; many of which are the most productive. They will transferring 1/2 script volumes to existing stores. The company will have no responsibility for the opioid suit. Debt will be approximately $500 million with access to $2.5 billion. Suppliers won’t be responsible for inventory; it will be going to their other stores or warehouse.
Rite Aid, which filed Chapter 11 in October, won approval of the restructuring plan after navigating a series of challenges that threatened to close the business. The pharmacy chain has closed more than 520 locations in bankruptcy, roughly a quarter of the 2,111 stores Rite Aid operated when it sought court protection.
Rite Aid used its bankruptcy to close hundreds of stores, sell its pharmacy benefit company Elixir, and negotiate settlements with its lenders, drug distribution partner McKesson and other creditors.
The restructuring plan is also subject to customary closing conditions. Although Rite Aid and its financiers anticipate the deal will be executed as planned, creditor lawyers said Friday the deal remains fragile and that costs associated with an unexpected delay could hinder the restructuring.
