By Dietrich Knauth
NEW YORK (Reuters) – Rite Aid (NYSE:) will ask a U.S. bankruptcy court to approve its restructuring plan on Thursday, seeking to cut $2 billion in debt and turn over control of the company to a group of its lenders.
One of the largest U.S. pharmacy chains, Rite Aid has said in court filings that the restructuring is the best way to pay its creditors and emerge from bankruptcy. It will ask U.S. Bankruptcy Judge Michael Kaplan to sign off on its Chapter 11 plan at a court hearing in Trenton, New Jersey.
Rite Aid used its bankruptcy to close hundreds of stores, sell its pharmacy benefit company Elixir, and negotiate settlements with its lenders, drug distribution partner McKesson (NYSE:), and other creditors, including individuals and governments that have sued it for allegedly contributing to the deadly U.S. opioid epidemic.
If the bankruptcy plan is approved, Rite Aid will emerge from Chapter 11 under the ownership of a group of lenders including investment funds Brigade Capital and HG Vora.
Rite Aid’s restructuring would provide $47.5 million to junior creditors, including individuals and local governments that have sued the company over its opioid sales.
Before it filed for bankruptcy, Rite Aid faced 1,600 opioid lawsuits, including one by the federal government alleging that the company ignored red flags when filling suspicious prescriptions for addictive opioid pain drugs.
Rite Aid’s bankruptcy proposal still faces several objections from its insurers, the state of Maryland, and certain opioid claimants, all of which focus on the pharmacy chain’s treatment of the opioid lawsuits.
Maryland and some opioid claimants argue that Rite Aid should not be able to pay off certain of its lenders while sweeping opioid lawsuits under the rug, and the insurers say Rite Aid is leaving them on the hook for future opioid litigation.
Kaplan will consider those objections before ruling on the bankruptcy plan.
The company stumbled under its high debt, revenue declines, increased competition, and opioid litigation, according to its court filings. It filed for bankruptcy in October 2023, after reporting $750 million in losses and $24 billion in revenue for the past fiscal year.
Rite Aid, which operated 2,000 pharmacies at the time of its bankruptcy, expects to emerge from Chapter 11 with a smaller retail footprint. It closed nearly 600 locations since filing for bankruptcy, including all of its locations in Ohio and Michigan.
