Rite Aid has received court approval for the next stage of its bankruptcy restructuring plan, which will allow a vote on the proposed plan.
The pharmacy chain filed for Chapter 11 bankruptcy in October 2023, hurt by soaring debt, falling sales, and consumer lawsuits. The plan, recently revised, will see Rite Aid reduce $2bn in debt and provide $47.5m to its junior creditors.
The chain’s lawyers said it is now ready to solicit votes from bondholders, which will be due on 15 April. No other group will be entitled to vote in Rite Aid’s bankruptcy. The proposal was supported by attorneys representing Rite Aid’s junior creditors, who said they did not object to their clients’ lack of voting rights. Junior creditors will also receive a 10% equity stake in the restructured Rite Aid, as well as the ability to pursue additional recoveries through further litigation or insurance payouts.
U.S. Bankruptcy Judge Michael Kaplan termed the voting proposal “unusual”, but approved regardless, noting: “Every day engenders additional cost and risk. We just don’t have the luxury of kicking this can down the road anymore.”
Rite Aid added that it aims to seek final court approval of its restructuring on 22 April 2024.
NAM Implications:
- Given that key stakeholders (other than Bondholders) have little choice.
- This plan will probably proceed.
- The main issue will be the extent of supplier willingness to supply…
- …following an eventual sale of what remains of Rite Aid.
