American pharmaceutical distribution giant Rite Aid has filed for bankruptcy to restructure its debt after years of losses and declining sales. The company also faces multimillion-dollar lawsuits over opioid prescriptions, including one from the Department of Justice, which was filed in March. The documentation registered by the company shows that it has assets of 7,650 million dollars and a total debt of 8,598 million dollars (about 8,160 million euros). The list of creditors highlights pharmaceutical wholesaler McKesson Corporation, with 668 million dollars; The US Bank Trust National Association, with 200 million dollars, the latter from a bond issue maturing in 2027, and the insurer Humana Health, with 137 million.
The company announced in a statement that it has reached a preliminary agreement with some of its senior secured note holders on the terms of a financial restructuring plan that will “reduce the company’s debt, increase flexibility in its finances and allow it to implement important initiatives.” To do so, it went through a voluntary court-administered process under Chapter 11 of the United States Bankruptcy Code.
As part of the process, Rite Aid received a commitment of $3.45 billion in new financing from some of its lenders. The company hopes this financing will provide enough liquidity for its restructuring, which includes closing stores, a possible sale of assets and the layoff of some of its 47,000 employees.
In a separate statement, Rite Aid today announced the appointment of turnaround expert Jeffrey Stein as the company’s new CEO, Chief Turnaround Officer and member of the company’s Board of Directors. He succeeds Elizabeth Burr as the company’s chief executive, who has served as interim CEO since January 2023 and will remain as a director.
“With the support of our lenders, we look forward to strengthening our financial foundation, advancing our innovation initiatives and accelerating the implementation of our innovation strategy. In this way, we are in a better positioned to offer the health products and services that our customers and their families rely on, now and in the future,” the new head of the company indicated in a statement.
Rite Aid Corporation is a chain of drugstores and convenience stores based in Philadelphia (Pennsylvania) that was founded in 1962 and went public in 1968. As of March 4, the closing date of its last fiscal year, it has more in 2,300 stores. , primarily in the states of Pennsylvania, California, New York, Michigan and Ohio. That year it had a turnover of 24,091 million dollars, but suffered losses of 750 million, according to its annual report. The company has been in the red for six years. In the stock market, it is down more than 80% so far this year. The company was worth $13 billion at the end of the last century, when it was the largest pharmacy chain in the United States. It is now worth less than 40 million, after management mistakes, ill-advised corporate operations and accounting scandals plunged it into almost permanent crisis.
Rite Aid has not been able to face competition from other giants in the sector, such as Walgreens and CVS, joined by Amazon and Wal-Mart. At the end of 2015, Walgreens announced an agreement to buy Rite Aid, but the agreement was ultimately reduced by half of its stores due to fears that it would be vetoed by competition authorities. Walgreens then announced the purchase of 2,186 stores and other assets from Rite Aid for $5.175 million, although 1,932 stores were eventually sold for $4.38 billion.
Although the operation helped clean up its accounts, it reduced its size and exacerbated the operational crisis. This adds to the legal problems with prescription opioids. According to the Department of Justice, Rite Aid filled hundreds of thousands of prescriptions that did not meet legal requirements. “These practices opened the floodgates for millions of opioid pills and other controlled substances to flow illegally from Rite Aid stores,” prosecutor Vanita Gupta said in the filing. and in the case.
The abuse of opioids as pain relievers has caused a public health crisis that has cost more than 650,000 lives in the United States, mostly from overdoses. The pharmaceutical companies claimed multimillion-dollar compensation, part of which is still in litigation, and the major retail pharmacy chains Walgreens, CVS and Walmart also reached an agreement in principle in November. 2022 to pay a total of about $13.8 billion.
Rite Aid’s bankruptcy is the latest to affect the retail sector in the United States and change the landscape of its shopping centers, where chains such as Toys R Us or Bed, Bath & Beyond have disappeared.
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