Rite Aid files for bankruptcy 8 months after exiting Chapter 11
Dive Brief:
Rite Aid filed for bankruptcy on Monday, with plans to sell itself, and has already had 'meaningful interest' from potential national and regional strategic buyers. Stores will remain open and operating, but plans are to liquidate all locations unless a buyer comes forward, according to court documents.
The drugstore retailer has secured commitments from some existing lenders to access $1.94 billion in new financing. That plus cash from operations is expected to be sufficient funding during the sale and court-supervised Chapter 11 process.
A sale is imminent, with an auction set for May 14 for the pharmacy assets and June 20 for other assets, per court documents. The company just exited a previous bankruptcy in September, after filing less than two years ago, emerging as a private business with about $2 billion less debt plus some $2.5 billion in exit financing.
Dive Insight:
Rite Aid said it never really had a chance to right itself following its 2023 bankruptcy, saying many vendors failed to live up to agreements to ease their terms. Moreover, the company faced unforeseen liquidity issues when, instead of the $166 million it expected, it could only – months later – secure $66.75 million, per court filings.
The empty shelves meant fewer impulse purchases and lower front-of-store sales, and the strained finances meant the retailer struggled to replenish assortments.
'In other words, the Company became trapped in a vicious cycle, where tightening liquidity led to empty store shelves, and vice versa,' Marc Liebman, managing director at Alvarez &Marsal North America who is serving as Rite Aid's chief transformation officer, wrote to the court on Tuesday.
At its 2023 filing, Rite Aid operated more than 2,100 stores in 17 states and employed more than 6,100 pharmacists and 45,000 total employees. During that bankruptcy, it sold or wound down about 800 underperforming stores. Since exiting that process, Rite Aid has closed another 29 underperforming locations. The company has now entered into purchase agreements of prescription files at 60 stores, and plans 50 closures without prescription sales. Finally, there are 275 stores 'that have or will have asset purchase agreements for regional transactions in process,' per court documents.
At this point, Rite Aid operates 1,277 stores and three distribution centers in 15 states and employs about 24,500 people.
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