Rite Aid Files for Chapter 11 Bankruptcy for a Second Time

Rite Aid has filed for Chapter 11 bankruptcy for a second time. However, the pharmacy store has vowed to stay open during this time to continue serving its customers and keep its employees off the unemployment line. Let’s take a look at what we know about this development.

Rite Aid Files Chapter 11

According to CNN, just seven months after the chain emerged as a private company and exited Chapter 11, Rite Aid announced on May 5 that it was declaring bankruptcy for the second time.

The struggling chain of pharmacies stated that it is seeking a buyer and that re-filing for Chapter 11 bankruptcy protection will aid in the process. The company stated it will keep its locations operational throughout the bankruptcy.

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“While we have continued to face financial challenges, intensified by the rapidly evolving retail and healthcare landscapes in which we operate, we are encouraged by meaningful interest from a number of potential national and regional strategic acquirors,” said Matt Schroeder, Rite Aid’s CEO, in a statement to CNN. “As we move forward, our key priorities are ensuring uninterrupted pharmacy services for our customers and preserving jobs for as many associates as possible.”

Rite Aid filed for bankruptcy for the first time in October 2023. After navigating the Chapter 11 procedure for around a year, it eventually emerged in September 2024 with $2 billion in debt reduced, $2.5 billion in operating cash secured, and roughly 500 outlets closed.

Rite Aid announced on May 5 that it had obtained new funding totaling about $2 billion to continue operating as it filed for bankruptcy the second time. Questions remain, however, as to whether this will be able to save the company from closure.

When big-box chains are considered, Rite Aid ranks seventh overall in terms of pharmacies, and it is the third-largest standalone drugstore chain in the U.S. About 1,250 of its stores are still open, which is about half as many as two years ago.

Rumors Were Swirling About Its Filing

Before this latest filing, Rite Aid was trying to find ways to avoid it. Last month, rumors emerged that the company was looking for a potential asset buyer.

The chain has faced several challenges over the years. In 2023, the U.S. Department of Justice sued the drugstore for violations of the False Claims Act and the Controlled Substances Act, in addition to several lawsuits pertaining to the opioid crisis.

Last year, Rite Aid experienced a significant data breach involving the personal data of 2.2 million people. Shortly afterward, a class action lawsuit was filed. The company agreed to pay $6.8 million a month ago to resolve the ongoing lawsuit.

What’s more, in July 2024, the pharmacy chain obtained permission to slash $2 billion from its debt, which received the green light from a bankruptcy judge in Trenton, New Jersey.

With the help of $2.55 billion in funding from its lenders, the pharmacy chain subsequently emerged from its first bankruptcy. This period enabled the business to complete the specifics of its bankruptcy plan and adjust to current changes in the law brought about by a recent ruling by the U.S. Supreme Court.

The restructuring included provisions to distribute $47.5 million to junior creditors to resolve claims from people and municipal governments involved in opioid-related lawsuits. Given Rite Aid’s involvement in multiple cases alleging its role in the opioid crisis, this action is noteworthy. According to Arik Preis, who represents drug creditors, thousands of claims received modest settlements. This is a minor but significant triumph given the company’s heavy debt load.

The business ultimately had to pay a multi-million dollar settlement for filling prescriptions that were either unneeded or lacked a legitimate medical purpose.