- Rite Aid said Tuesday that it has received interim court approval to access up to $3.45 billion in debtor-in-possession financing from some of its lenders. The financing will enable the company to keep paying employees and vendors after filing for Chapter 11 bankruptcy on Sunday.
- The pharmacy retailer also wants to sell 78 store leases and 21 fee-owned properties in 12 states. New York-based A&G Real Estate Partners said the leases and properties are available in private sales pending court approval as part of the retailer’s restructuring.
- Rite Aid said in court documents that unprofitable stores have hurt the company’s growth and turnaround initiatives. Earlier this year, the company engaged consulting firm Alvarez & Marsal to conduct a footprint assessment, assist with Rite Aid's business plan, accelerate cost savings and support possible contingency operations.
Rite Aid’s business portfolio “is burdened by unprofitable stores that it cannot effectively exit absent the tools available in Chapter 11,” Jeffrey Stein, who was appointed CEO and chief restructuring officer immediately upon the Chapter 11 filing, said in court documents. “Those stores challenge the company’s earnings profile, turnaround initiatives, and free cash flow.” Stein stated that Rite Aid has $80 million in annual "dead rent" costs because of its inability to exit underlying leases outside of a Chapter 11.
At the time it filed, Rite Aid had 2,111 stores in 17 states and seven distribution centers.
Rite Aid wants to sell leases on stores in California, Maryland, Michigan, New Jersey, New York, Ohio, Oregon, Pennsylvania and Washington. A&G is also offering fee-owned properties — stores and land — in Alabama, California, Idaho, Michigan, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania and Washington.
According to A&G Real Estate Partners, including options, all leases being marketed by Rite Aid have more than 10 years of remaining term. The owned and leased stores range from 6,400 to 37,154 square feet. They include downtown, power center and freestanding locations with drive-thru windows.
Stein also said in court documents that Rite Aid took advantage of a favorable real estate market to enter dozens of sale-leaseback transactions for owned properties, including distribution centers, between 2021 and this year. Those transactions resulted in net proceeds totaling $308 million.
As the restructuring process continues, Rite Aid will “continue assessing its property footprint and close additional stores to improve its overall financial performance,” A&G Real Estate Partners said in a press release. Andy Graiser, co-president of A&G, said that “portfolio optimization is a powerful and essential part of that go-forward strategy.”
The company this week settled a lawsuit the retailer filed against McKesson after filing for bankruptcy, Bloomberg reported. McKesson is the retailer’s largest prescription drug supplier. Per Bloomberg’s report, Rite Aid said McKesson’s threat to end its supply agreement jeopardized its ability to survive bankruptcy and also risked the health of customers who rely on Rite Aid pharmacies for essential medicines.
The New York Stock Exchange on Monday also said it is moving to delist Rite Aid as a result of the company’s Chapter 11 filing. Trading of the company’s stock was suspended immediately. Rite Aid acknowledged earlier this month that it risked delisting after its closing share price remained below $1.00 over a 30-trading-day period. Rite Aid also faced delisting from the stock exchange in 2019 after two failed merger plans.