Rite Aid Files for Chapter 11 Bankruptcy Protection
Rite Aid filed for Chapter 11 bankruptcy protection in New Jersey on Sunday and said it would begin restructuring to significantly reduce its debt. The company said it reached a deal with creditors on a restructuring plan that includes evaluating its retail footprint and closing underperforming locations. Rite Aid also said lenders agreed to extend $3.45 billion in new funding to “provide sufficient liquidity” as it embarks on its restructuring plan. The drugstore chain has been grappling with slowing sales, mounting debt, and a slew of lawsuits that allege the company helped fuel the nation’s opioid epidemic by oversupplying painkillers.
Total Retail's Take: In a statement emailed to Total Retail, Fitch Ratings' David Silverman (senior director, retail) offered his thoughts on Rite Aid's decision to file for bankruptcy protection:
"Rite Aid’s bankruptcy filing follows years of challenged operating performance; a weakening competitive position, particularly against larger peers; elevated financial leverage; and limited cash flow, which has limited Rite Aid’s ability to invest in its business and stabilize market share. The company’s bankruptcy plan would turn some creditors into equity holders, reducing debt and cash interest expense. Lower cash interest could allow Rite Aid to increase its investment in strategic initiatives. Conversely, the company also plans to close a number of its existing store base. A smaller footprint could leave an already structurally challenged Rite Aid further weakened in terms of competing for inclusion in pharmaceutical networks and negotiating with vendors and partners."