Rite Aid is in negotiations with creditors over a plan to liquidate up to 500 of its approximately 2,200 locations in 17 states as part of a possible Chapter 11 filing, The Wall Street Journal reported Friday. The move would shrink the company’s store footprint by nearly one quarter.
The retail pharmacy chain could allow creditors to take over its remaining business or move to sell the company in bankruptcy. News broke last month that Rite Aid is considering bankruptcy. The company has $3.3 billion in debt.
In June, Rite Aid reported quarterly revenues of $5.7 billion, down from $6 billion a year ago. Although its retail pharmacy segment revenues rose 3.4% year over year to $4.49 billion, Rite Aid also reported a net loss last quarter of nearly $307 million versus $110 million year over year.
The company also faces lawsuits – and possible further financial liability – that accuse Rite Aid of contributing to the U.S. opioid abuse epidemic by knowingly and unlawfully filling hundreds of thousands of opioid painkiller prescriptions.
In a Monday statement to sister publication Retail Dive, a Rite Aid spokesperson said it’s “continuing to work collaboratively and constructively with our financial stakeholders to identify the best path forward to reduce our debt and position the business for continued success.”
“Given the conversations remain ongoing, no decisions have been made at this time and we are focused on reaching an agreement with our financial stakeholders that will make Rite Aid stronger,” the spokesperson added. “We are confident we are taking the right steps to help us succeed, both now and in the future.”
According to a corporate risk analysis published in August by RapidRatings, Rite Aid shows weakness in its leverage, liquidity and earnings performance and therefore is a high default risk – a nearly 10% probability of default in 12 months.
As a result of negative cash from operations, Rite Aid “was unable to cover any portion of capital expenditures or debt balances through internally generated cash flow,” RapidRatings said. In its present financial position, “if current trends persist, it would be logical to expect that Rite Aid Corp. will face serious default risk this coming year,” the analysis said.
