Rite Aid (OTC:RADCQ) is seeking approval from a bankruptcy court for its restructuring plan that will cut $2B in debt and emerge from Chapter 11 owned by a group of investors.
The company argues that the restructuring plan is the best option to pay its creditors and resume operations, Reuters reported. The case will go in front of a NJ bankruptcy judge on Thursday.
Faced with mounting lawsuits over its handling of the opioid crisis and saddled with oppressive debt, Rite Aid (OTC:RADCQ) filed for bankruptcy last October, closing more than 500 stores across the country and selling its Elixir business to ”stalking horse bidder” MedImpact for $575M. MedImpact recently failed in its attempt to recoup $200M from Rite Aid (OTC:RADCQ), arguing that the company sold Elixir without disclosing outstanding reimbursements payments that were due to pharmacies including CVS Health (CVS).
In May, bondholders agreed to provide the company with $57M to take the company out of bankruptcy.
Not everyone is on board with Rite Aid’s (OTC:RADCQ) restructuring plan, however, and the State of Maryland and insurers will likely object to the motion’s “overly broad releases.” Maryland argues that Rite Aid (OTC:RADCQ) should continue to be held liable for opioid lawsuits, while its insurers remain exposed to damages resulting from numerous lawsuits.
Also at issue is an employment guarantee for CEO Jeffrey Stein, who stands to receive a $20M “success fee” after the company emerges from bankruptcy, equal to the total amount allocated to all of Rite Aid’s (OTC:RADCQ) creditors.
The bankruptcy hearing comes at the same time Walgreen’s (WBA) lowered its full-year outlook due to a “difficult operating environment” and announced plans to close a “substantial number” of poorly performing stores. The company also plans to pull back on its plans into the primary-care business, CEO Tim Wentworth said on Thursday.
Walgreen’s (WBA) shares slid by as much as 16% in premarket trading, taking down rival CVS Health (CVS) by more than 3% in sympathy.