Rite Aid files for bankruptcy, names Jeffrey Stein as new CEO
Rite Aid on Sunday announced it has reached an agreement in principle with certain of its senior secured noteholders on the terms of a financial restructuring plan that will allow the company to accelerate its ongoing business transformation. Implementing the contemplated restructuring plan will significantly reduce the company’s debt, increase its financial flexibility and enable it to execute on key initiatives. In connection with this, Rite Aid has initiated a voluntary court-supervised process under Chapter 11 of the U.S. Bankruptcy Code.
Rite Aid is continuing to deliver leading healthcare products and services across its retail and online platforms for the nearly one million customers it serves daily. The company remains committed to improving health outcomes and delivering on its purpose to help people achieve whole health for life, the company said.
The court-supervised process provides an orderly and efficient forum for Rite Aid to:
- Finalize and build consensus for the agreement in principle the company has reached with certain of its senior secured noteholders;
- Accelerate the company’s store footprint optimization plan;
- Implement a proposed transaction under which MedImpact would acquire Elixir Solutions, subject to the outcome of a court-approved marketing process;
- Access additional liquidity; and
- Resolve litigation claims in an equitable manner.
In connection with this process, Rite Aid has received a commitment for $3.45 billion in new financing from certain of its lenders. This financing is expected to provide sufficient liquidity to support the company throughout this process.
[Read more: Rite Aid announces receipt of notice of non-compliance with NYSE Continued Listing Standards]
Rite Aid also announced the appointment of Jeffrey Stein as CEO, chief restructuring officer and a member of the company’s board of directors, effective immediately. Stein is an experienced corporate leader and executive director with significant expertise in supporting companies that are driving meaningful business transformations and undergoing financial restructurings. He succeeds Elizabeth (“Busy”) Burr, who has served as Interim CEO since January 2023. Burr will continue in her role as a director on the company’s board.
Stein brings more than three decades of experience as a leader and executive director at both public and private companies. Stein has particular expertise in supporting companies that are driving meaningful business transformations and undergoing financial restructurings. This includes developing and enhancing corporate growth and turnaround strategies, evaluating financing alternatives, analyzing capital investment programs, managing complex litigation matters and assessing asset acquisition and disposition opportunities.
Bruce Bodaken, Rite Aid chairman, stated, “After a thorough and thoughtful search process, the board unanimously agreed that Jeff is the right executive to lead Rite Aid through its transformation. Jeff is a proven leader with a strong track record of guiding companies through financial restructurings. We look forward to benefitting from his contributions and leveraging his expertise as we strengthen Rite Aid’s foundation and position the business for long-term success.”
Stein said, “As CEO, CRO, and a member of the board of directors, my priorities will include overseeing the actions now underway to strengthen the company’s financial position and further advance its journey to reach its full potential as a modern neighborhood pharmacy. I have tremendous confidence in this business and the turnaround strategy that has been developed in recent months. I look forward to working closely with the board, management team, and our lenders and bond holders as we better position Rite Aid to deliver on our purpose of bringing people whole health for life.”
“I am honored to have had the opportunity to lead this incredible team during this pivotal transition period,” Burr said. “I can’t think of a better leader than Jeff to take the reins at this stage of Rite Aid’s evolution, and I look forward to working closely with him as I continue serving on the board. I am grateful for the hard work and dedication of our associates during my tenure as Interim CEO, and I’m confident they will give Jeff the same levels of support as the Company moves through the next phase of its transformation.”
“On behalf of the entire board, I thank Busy for the mark she has made as Rite Aid’s Interim CEO,” Bodaken said. “Busy has been a true culture carrier for Rite Aid, and an avid cheerleader of our store, pharmacy and distribution center team members. Under her leadership, we have continued to make significant progress on our turnaround initiatives to drive growth and reduce costs, and we look forward to her continued contributions as a member of the Company’s Board.”
In addition to Stein, Rite Aid has appointed Carrie Teffner and Paul Keglevic to its board of directors, also effective immediately.
Teffner has over 30 years of strategic, financial and operational leadership experience assisting retail and consumer product companies in driving growth and profitability. She has deep expertise leading successful large-scale transformation initiatives and has served as executive vice president and chief financial officer at several Fortune 500 companies. Teffner currently serves on the boards of DXC Technology, International Data Group and BFA Industries. She previously served on the boards of Ascena Retail Group, Avaya and GameStop.
Keglevic is an NACD-certified director with over 45 years of leadership experience and deep expertise in finance and accounting, operational improvement and turnarounds, restructuring and risk management across a range of industries. He has served as CEO, CFO, chief restructuring officer and chief risk officer at numerous companies, most recently as CEO of Energy Future Holdings. Earlier in his career, Keglevic was a partner and member of the U.S. leadership team at PricewaterhouseCoopers. He currently serves on the boards of WeWork, Evergy and Envision Healthcare. Mr. Keglevic previously served on the boards of Ascena Retail Group, Bonanza Creek Energy, Clear Channel Holdings, Cobalt International Energy and Frontier Communications, among others. With the appointments of Stein, Teffner and Keglevic, Rite Aid’s board of directors will have nine members.
Stein said, “Rite Aid has served customers and communities across our country for more than 60 years, and the important actions we are taking today will enable us to move ahead as a stronger company. With the support of our lenders, we look forward to strengthening our financial foundation, advancing our transformation initiatives and accelerating the execution of our turnaround strategy. In doing so, we will be even better able to deliver the healthcare products and services our customers and their families rely on – now and into the future.”
Stein continued, “We remain focused on serving our customers and communities, and we are grateful that they continue to choose our stores and pharmacies for their healthcare needs. We thank our associates for their ongoing hard work and dedication, and we extend our gratitude to our partners, suppliers and vendors for their continued support.”
Furthermore, the company has reached an agreement in principle with certain of its senior secured noteholders on the terms of a financial restructuring that would significantly reduce the company’s debt.
Rite Aid intends to use the court-supervised process to finalize the agreement in principle, build additional consensus for the financial restructuring plan it contemplates and implement it as quickly and efficiently as possible.
[Read more: Rite Aid announces receipt of notice of non-compliance with NYSE Continued Listing Standards]
Rite Aid regularly evaluates its store portfolio to ensure it is operating efficiently while meeting the needs of its customers, communities and associates. In connection with the court-supervised process, the company will continue assessing its footprint and close additional underperforming stores. These efforts will further reduce the company’s rent expense and are expected to strengthen its overall financial performance.
Stein added, “The court-supervised process provides Rite Aid with legal tools to accelerate our footprint optimization in an efficient and orderly manner. We look forward to working closely with our landlords to determine the best path forward for each of our stores.”
The company is making every effort to ensure customers of impacted stores have access to health services, whether at another Rite Aid or a nearby pharmacy, and will work to transfer prescriptions accordingly so that there is no disruption of services. The company also will transfer associates at impacted stores to other Rite Aid locations where possible, Rite Aid said.
A&G Realty Partners is assisting the company with its store closing and lease restructuring program. Rite Aid landlords are encouraged to contact A&G Realty Partners through its website, www.agrealtypartners.com.
Rite Aid has entered into an agreement with MedImpact Healthcare Systems, an independent pharmacy benefit solutions company, pursuant to which MedImpact will acquire Rite Aid’s Elixir Solutions business. Under the terms of the agreement, MedImpact will serve as the “stalking horse bidder” in a court-supervised sale process under section 363 of the U.S. Bankruptcy Code. Accordingly, the proposed transaction is subject to higher and better offers, court approval and other customary conditions.
Elixir Solutions is operating normally and continuing to serve clients, plan sponsors, members and customers as usual, the company said.
Elixir Insurance is not included in Rite Aid’s Chapter 11 process or the proposed transaction with MedImpact, and it is continuing to operate and serve members as usual.
Additional Information About the Court-Supervised Process:
Rite Aid and certain of its subsidiaries, including those that comprise Elixir Solutions, have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of New Jersey. Elixir Insurance is not included in the Chapter 11 process.
The company has filed a number of customary motions with the Court seeking authorization to support its operations, including the payment of employee wages, salaries and benefits without interruption. The company expects to receive court approval for these requests shortly. The company intends to pay vendors and suppliers in full for goods and services provided on or after the filing date, Rite Aid said.
Additional information regarding the company’s court-supervised process is available at www.riteaidrestructuring.com. Court filings and other information related to the proceedings are available on a separate website administrated by the company’s claims agent, Kroll, at https://restructuring.ra.kroll.com/RiteAid; by calling Kroll toll-free at (844) 274-2766, or (646) 440-4878 for calls originating outside of the U.S. or Canada; or by emailing Kroll at [email protected].
Kirkland & Ellis is serving as legal advisor, Guggenheim Securities is serving as investment banker and Alvarez & Marsal is serving as transformation officer and financial advisor to the company.