Rite Aid’s Bankruptcy Plan Update
U.S. Judge Approves Rite Aid’s Bankruptcy Voting Plan
By Dietrich Knauth
Rite Aid, a leading U.S. pharmacy chain, has been granted permission by a U.S. judge to start voting on a bankruptcy restructuring plan. The plan proposes transferring the majority of the company’s equity to its bondholders while keeping the option of a sale open.
Urgency in Bankruptcy Proceedings
In a court hearing in Trenton, New Jersey, U.S. Bankruptcy Judge Michael Kaplan endorsed Rite Aid’s voting proposal, emphasizing the need for swift action to avoid additional restructuring expenses that could result in liquidation. Kaplan stated, “We just don’t have the luxury of kicking this can down the road anymore.”
Addressing Debt and Streamlining Operations
With a bankruptcy filing in October, Rite Aid aims to tackle its substantial debt, close underperforming retail locations, and divest non-core business units. The revised bankruptcy plan seeks to reduce $2 billion in debt and allocate $47.5 million to junior creditors, including those who have taken legal action against the company for alleged malpractices.
Resolving Legal Issues and Structuring Debt
Rite Aid is in the process of finalizing settlements crucial to the restructuring, including addressing a U.S. Department of Justice inquiry into its opioid sales. The company is geared up to seek votes from bondholders, who play a pivotal role in its bankruptcy proceedings.
Stakeholder Support and Recovery Prospects
Junior creditors, including opioid claimants, back the settlements that facilitate their recovery. While unsecured creditors are excluded from voting, junior creditors are set to receive $47.5 million and a 10% equity share in the restructured Rite Aid.
Future Prospects and Ongoing Negotiations
Amid ongoing discussions with potential purchasers, Rite Aid remains optimistic about the restructuring timeline, with final court approval anticipated on April 22. The company’s sale of its pharmacy benefit subsidiary in January signifies progress in its restructuring efforts.
