Retail pharmacy chain Rite Aid has emerged out of bankruptcy after slashing about $2 billion from its debt, the company announced last week.
The company also added about $2.5 billion in exit financing to support the business going forward, Rite Aid said.
In a press release, Rite Aid said it had successfully completed its financial restructuring and emerged from Chapter 11, "marking a new beginning as a stronger company with a rightsized store footprint, more efficient operating model, significantly less debt and additional financial resources."
Rite Aid will now operate as a private company under a new chief executive, Matt Schroeder, who most recently served as chief financial officer. Schroeder succeeds Jeffrey Stein, who joined the company as CEO and chief restructuring officer to lead the court-supervised Chapter 11 process back in October.
“Matt has served in various leadership positions during his tenure at Rite Aid and has a deep understanding of all aspects of our business,” said Bruce Bodaken, chair of Rite Aid’s Board of Directors during its Chapter 11 process. “He has shown outstanding leadership through this process and is an excellent fit for the Company as it advances as a stronger organization.”
“I am honored to lead Rite Aid on its journey as we continue serving our customers and communities,” Schroeder said in a statement. “Thanks to the dedication of the entire organization, we are beginning our next phase as a transformed company. I see Rite Aid’s remarkable potential, and I look forward to working with the team as we remain committed to our purpose of helping our customers achieve whole health for life.”
Rite Aid filed for bankruptcy protection in October in an effort to address lawsuits over its alleged role in the opioid epidemic and a debt load rising to nearly $4 billion.
In a statement on its Chapter 11 bankruptcy filing nearly a year ago, the company said it received $3.5 billion in financing and debt reduction agreements from lenders to support business operations throughout the financial restructuring process. The restructuring plan will "significantly reduce the company’s debt, increase its financial flexibility and enable it to execute on key initiatives," Rite Aid executives said at the time.
“Emergence is a pivotal moment in Rite Aid’s history, enabling it to move forward as a significantly transformed, stronger and more efficient company,” Stein said in a statement last week. “We are grateful for the ongoing support of our customers, associates and partners, and we look forward to continuing to provide leading pharmacy services designed to improve health and wellness outcomes across the communities we serve. I am excited about Rite Aid’s future as it continues to focus on executing its strategy and delivering for its customers and stakeholders.”
Back in June 2023, Rite Aid had a total debt of $8.6 billion, according to a filing with the U.S. Bankruptcy Court for the District of New Jersey, Yahoo! Finance reported.
The company lost $307 million between March and May 2023, according to a financial report (PDF) filed in June 2023 with the U.S. Securities and Exchange Commission, and it lost about three-quarters of a billion dollars between March 2022 and March 2023. Over the past six years, Rite Aid has tallied nearly $3 billion in losses.
A year ago, the company employed more than 6,100 pharmacists and operated more than 2,100 retail pharmacy locations across 17 states. In its bankruptcy court documents filed in October, Rite Aid said it planned to close 154 stores nationwide.
The company has slimmed its footprint considerably as, according to its website, it now has about 1,416 stores in 16 states.
In addition to closing underperforming stores, Rite Aid also sold off some of its businesses. The company sold its Elixir Solutions business to MedImpact Healthcare Systems, an independent pharmacy benefit solutions company, for $577 million back in February.
Rite Aid also sold parts of its Health Dialog business to Carenet Health, it announced in May. Carenet acquired Health Dialog’s Nurse Advice Line, Chronic Care Management, Shared Decision-Making solutions, and all client contracts associated with these services. Health Dialog’s Medication Adherence Management and Medication Therapy Management solutions were not included in the transaction.
Several attempts to merge with other retails fell through in the past few years. In 2015, Walgreens Boots Alliance announced plans to buy Rite Aid for $17.2 billion. But, in 2017 Walgreens abandoned the deal and instead bought nearly half of its smaller rival's stores for $5.1 billion after U.S. regulators raised antitrust concerns about the original plan, as media reported.
In February 2018, grocery store operator Albertsons and Rite Aid announced a $24 billion merger but that plan, too, was scrapped.
Two years ago, in 2022, Rite Aid inked a partnership with Google Cloud for a multiyear technology partnership that will help ramp up the pharmacy chain's digital and data capabilities. Four years ago, the company unveiled its new concept stores as it overhauled its brand to keep up with competitors like CVS Health and Walgreens.
The "Stores of the Future" model aimed to be "spa-like destinations," the company said in its announcement back in 2020. Millennial and Generation X women are a key demographic Rite Aid is targeting with the revamp, it said at the time.
Retail pharmacies are under pressure with softer consumer spending, slowing store sales, staffing shortages and increased competition for healthcare services from retailers like Walmart and Amazon.
Last year, Ash Shehata, principal, national sector leader, Healthcare and Life Sciences at advisory firm KPMG, told Fierce Healthcare that Rite Aid would still face the same challenges as its larger competitors, CVS and Walgreens, when it reemerges from bankruptcy.
"It is very difficult for traditional retail pharmacies to stand still in the current environment. You need to determine if you want to shift towards an online model, become a payer, or become a provider," Shehata said.
Kirkland & Ellis LLP served as Rite Aid’s legal advisor, Guggenheim Securities, LLC as investment banker and Alvarez & Marsal as transformation officer and financial advisor to the company.