Rite Aid wins restructuring plan approval
Rite Aid has reportedly been cleared to exit bankruptcy after winning court approval on a restructuring plan that will prevent the chain from liquidation by handing control of the business to key creditors, per a Yahoo Finance report.
The report said that Judge Michael Kaplan would approve a restructuring deal that cuts about $2 billion in debt and gives Rite Aid access to about $2.5 billion in exit financing to fund a turnaround plan which advisers call “Rite Aid 2.0.”
The report went on to say that the deal also includes a series of settlements resolving investigations by federal authorities and more than 1,000 civil lawsuits related to opioid prescriptions. Rite Aid has said the settlements and broader restructuring plan keeps open critical neighborhood pharmacies and will save thousands of jobs.
[Read more: Rite Aid reportedly close to deal on post-bankruptcy financing]
The legal settlement covers Rite Aid as well as potential claims against its lenders, which are not in Chapter 11, the report noted, adding, that Rite Aid lawyer Aparna Yenamandra said during a hearing in New Jersey bankruptcy court that the deal will only settle legal claims for creditors who agree to the settlement.
Rite Aid planned to obtain this type of consent before the Supreme Court ruled Thursday that bankruptcy law doesn’t permit certain types of non-consensual deals, Yenamandra said.
The report also noted that Judge Kaplan said he’d approve the restructuring after denying a handful of legal objections and after Rite Aid resolved disputes involving its insurers. Lawyers said they need to hammer out language that will be used in the court order before it’s submitted to the court, per the report.
[Read more: Rite Aid to shutter 53 more stores across 9 states]
The restructuring plan also is subject to customary closing conditions. Although Rite Aid and its financiers anticipate the deal will be executed as planned, creditor lawyers said the deal remains fragile and that costs associated with an unexpected delay could hinder the restructuring, the Yahoo Finance report said.