(Bloomberg) — US pharmacy chain Rite Aid Corp. filed for bankruptcy as it faces a debt load of more than $3 billion and claims over its role in the opioid epidemic.
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The company secured $3.45 billion from lenders to fund its operations during the process, it said in a statement late Sunday. Rite Aid also appointed Jeffrey Stein as chief executive officer, citing his expertise in turning around companies.
“With the support of our lenders, we look forward to strengthening our financial foundation, advancing our transformation initiatives and accelerating the execution of our turnaround strategy,” Stein said in the statement.
The Philadelphia, Pennsylvania-based chain had been preparing a Chapter 11 filing as it grapples with billions in long-term borrowings and declining sales. The situation worsened after the US government’s claim it filled hundreds of thousands of unlawful prescriptions for opioid painkillers.
Other national pharmacy chains, including CVS Health Corp. and Walgreens Boots Alliance Inc., have already agreed to pay big sums for their involvement in the opioid epidemic. The two chains settled late last year with more than a dozen states, agreeing to pay more than $10 billion.
Rite Aid clinched a preliminary agreement with holders of its senior secured notes that would significantly reduce its debt load, the company said, without elaborating. In its Oct. 15 Chapter 11 bankruptcy petition filed in New Jersey, it listed both assets and liabilities in the range of $1 billion to $10 billion.
The company estimated it had more than 100,000 creditors and said funds would be available for distribution to unsecured creditors. McKesson Corp. is the largest unsecured, non-insider creditor, with trade-payable claims of about $667.6 million, according to the documents.
Rite Aid is working with A&G Realty Partners to shutter more stores to cut down on rent costs of its more than 2,100 locations as part of the turnaround efforts. Separately, it’s looking to sell its Elixir Solutions unit through an agreement with MedImpact Healthcare Systems Inc., which is subject to higher offers, court approval and other customary conditions.
S&P Global Ratings cut the retailer’s borrowings further into junk in August, citing a large debt load maturing from 2025 and “potentially significant” claims from opioid lawsuits.
–With assistance from Catherine Bosley.
(Writes through, adds details of turnaround plan)
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