US pharmacy chain Rite Aid agrees to bankruptcy mediation, gets loan approval

Rite Aid

19/12/2023 23:00

By Dietrich Knauth
       NEW YORK, Dec 19 (Reuters) - Pharmacy chain Rite Aid
received court approval on Tuesday for a bankruptcy loan that
would let the company borrow an additional $200 million, while
agreeing to enter mediation with committees representing junior
creditors and people who have accused the company of
contributing to the U.S. opioid epidemic.    
    Rite Aid's bankruptcy financing, which the company valued at
$3.45 billion due to its refinancing of pre-existing debts, had
been opposed by the U.S. government, Rite Aid's creditors
committee, and a committee representing plaintiffs suing the
company, including those with opioid-related claims.
    Those committees have argued that Rite Aid's lenders are the
only group that stands to benefit from the company's
restructuring, and that victims impacted by the opioid crisis
currently stand to get next to nothing out of the bankruptcy.
They withdrew their objections after Rite Aid promised to
mediate their concerns in January. 
    Rite Aid, which operates about 2,000 retail pharmacies in 17
U.S. states, filed for bankruptcy protection on Oct. 15, seeking
to close underperforming stores, sell its pharmacy benefit
company Elixir and resolve over 1,600 lawsuits alleging it
fueled the opioid epidemic by filling illegal or suspicious
prescriptions. 
    Rite Aid competitors Walgreens  WBA.O , Walmart  WMT.N  and
CVS  CVS.N  have agreed to pay $13.8 billion to settle a wave of
similar opioid lawsuits outside of bankruptcy.
    U.S. Bankruptcy Judge Michael Kaplan at a hearing in
Trenton, New Jersey, said he would approve the financing after
he had time to review Rite Aid's last-minute revisions to the 
agreements. Some of those revisions addressed Justice Department
(DOJ) concerns about legal terms that could have interfered with
government oversight of Elixir, Kaplan said. 
    The judge said earlier versions of the loan agreements
contained "somewhat aggressive provisions" that understandably
raised concerns about DOJ's authority to seize cash from Elixir
as part of an ongoing investigation into the company's receipt
of potential overpayments from the government Medicare health
program. 
    Rite Aid's revised loan documents make clear that the
company is not standing in the way of DOJ's law enforcement
authority, Kaplan said, except to the extent that it asked DOJ
to provide 10 days notice of any regulatory action or property
seizure from Elixir. 
    Kaplan agreed to require DOJ to provide 10 days notice
before any action that would impact Rite Aid's bankruptcy, a
step that would let the company focus on its restructuring
efforts, without limiting government oversight authority.

 (Reporting by Dietrich Knauth, Editing by Alexia Garamfalvi and
Bill Berkrot)
 ((Dietrich.Knauth@thomsonreuters.com;))