Rite Aid Corporation (NYSE: RAD) has officially filed for bankruptcy and announced that it has successfully acquired $3.45 billion in fresh financing, which it plans to use to support its restructuring efforts. The decision to file for bankruptcy comes as the leading U.S. pharmacy chain grapples with declining sales and multiple opioid-related lawsuits.
In 2022, Rite Aid agreed to pay up to $30 million to resolve lawsuits that accused its pharmacies of contributing to the oversupply of prescription opioids. The company has since reached a consensus with its creditors on a financial restructuring plan aimed at reducing its debt and positioning itself for future growth, with the bankruptcy filing marking a pivotal step in this process.
According to Rite Aid, the restructuring plan will “significantly reduce the company’s debt” while also addressing litigation claims in an equitable manner.
Earlier this year, the U.S. Justice Department took a firm stance against Rite Aid (NYSE: RAD) by filing a complaint. The complaint alleged that the company knowingly filled hundreds of thousands of unlawful prescriptions for controlled substances from May 2014 to June 2019. It also accused pharmacists and the company of ignoring warning signs that suggested the prescriptions were illegal. This legal action was initiated following complaints from three whistleblowers who had formerly worked at Rite Aid pharmacies.
Jeffrey Stein, the head of a financial advisory firm, has taken the reins as Rite Aid’s new CEO on Sunday. He succeeded Elizabeth Burr, who served as interim CEO and remains on Rite Aid’s board.
Earlier this month, Rite Aid Corporation notified the New York Stock Exchange of its noncompliance with listing standards. Although the company has been granted a grace period, allowing its stock to continue to be listed and traded.
Rite Aid has affirmed that the bankruptcy filing in New Jersey and noncompliance with listing standards will not disrupt its business operations. Additionally, it will not impact its obligations to report to the U.S. Securities and Exchange Commission.
Rite Aid has reassured stakeholders that it is implementing measures to guarantee consistent wage payments and cover other operational expenses. However, they plan to close certain ‘underperforming’ stores among their 2,100+ pharmacies spread across 17 states.
The company’s latest financial reports highlight the severity of its situation, with revenues plummeting to $5.7 billion in the most recent fiscal quarter that ended on June 3. This is down from $6.0 billion in the previous year, resulting in a significant net loss of $306.7 million.
Shares of Rite Aid Corporation (NYSE: RAD) plunged 16.81% to close at $0.6483 on Friday.