Rite Aid’s $2 Billion Debt Cut Approved

Rite Aid, the well-known pharmacy chain, has secured approval for its restructuring plan in a landmark decision by a U.S. bankruptcy judge. This move allows Rite Aid to slash a staggering $2 billion in debt and transfer control to a consortium of lenders, marking a crucial step in its financial rehabilitation.

The approval, granted by Judge Michael Kaplan in a Trenton, New Jersey, court hearing, comes after Rite Aid faced the looming threat of closure and liquidation had the restructuring not been greenlit. The company, which filed for Chapter 11 bankruptcy in October 2023 amidst severe financial strain, reported losses of $750 million against $24 billion in revenue for the previous fiscal year.

During the proceedings, Rite Aid utilized bankruptcy measures to streamline operations, including the closure of hundreds of stores and the sale of its pharmacy benefit unit, Elixir. The restructuring also involved settlements with key creditors like McKesson and various lenders, pivotal in stabilizing its financial footing.

Part of the restructuring includes provisions to allocate $47.5 million to junior creditors, addressing claims from individuals and local governments embroiled in opioid-related litigation. This move is particularly significant amid Rite Aid’s involvement in numerous lawsuits alleging its role in the opioid crisis. Arik Preis, representing opioid creditors, noted that thousands of claimants are poised to receive modest settlements, signaling a small but meaningful victory given the company’s substantial debt burden.

Despite facing objections from certain states, Rite Aid successfully resolved opioid-related claims with the majority of jurisdictions where it operates, clearing a significant hurdle in its path to financial recovery.

With the approval secured, Rite Aid anticipates exiting bankruptcy within a month, buoyed by $2.55 billion in financing from its lenders. This time frame allows the company to finalize details of its bankruptcy arrangement, adapting to recent legal shifts influenced by a recent U.S. Supreme Court decision.

As Rite Aid prepares to emerge from bankruptcy with approximately 1,300 stores — down from over 2,000 at the time of filing — the focus now shifts to executing its revised business strategy. The restructuring marks a critical juncture for Rite Aid as it seeks to regain stability and renew its commitment to serving communities across the United States.