Rite Aid Corp. is again on shaky financial ground, with reports indicating the drugstore chain is edging closer to a second bankruptcy less than a year after emerging from Chapter 11. Struggling with mounting debt, dwindling cash reserves, and ongoing legal pressures tied to the opioid crisis, the company is now considering selling off portions of its business in a last-ditch effort to stay afloat. As insiders reveal new details about the pharmacy chain’s plans, the future of one of America’s most recognizable retail names hangs in the balance.
Rite Aid Pursues Emergency Financing as It Considers Store Sell-Offs and Closures
With severe liquidity issues, Rite Aid Corp. is actively seeking a debtor-in-possession (DIP) loan to sustain operations during its potential second restructuring process, sources familiar with the matter told Bloomberg.
The restructuring strategy may involve selling off select store locations in certain regions to interested bidders, while unsold sites could face complete shutdown. The company is reportedly receiving advisory support from Guggenheim Securities.
How Many Rite Aid Locations Have Been Closed Since Its First Bankruptcy Filing?
Rite Aid Corp. has undergone a significant downsizing since its initial Chapter 11 bankruptcy filing in October 2023, brought on by mounting debt and legal liabilities tied to the opioid crisis. As part of its restructuring efforts, the pharmacy chain shuttered more than 800 stores nationwide—approximately 39% of the 2,063 locations it operated at the time of filing.
According to ABC27, the closures were heavily concentrated in Michigan and Ohio, where more than 75% and 74% of stores, respectively, were shut down. Other hard-hit states include Pennsylvania, California, and New York, each seeing between 20% and 24% of their Rite Aid stores permanently closed.
By September 2024, Rite Aid emerged from bankruptcy as a privately held company, having wiped out roughly $2 billion in debt and secured $2.5 billion in exit financing to stabilize operations. However, despite these measures, fresh reports suggest that the retailer may be closing more stores as it heads toward another restructuring phase.
In March, Bloomberg reported that Rite Aid entered negotiations with lenders tied to its asset-based loan, seeking full access to the facility to restock inventory. As part of the agreement, the company was required to meet specific financial and operational benchmarks, one of which included further store closures, hinting at more shutdowns on the horizon.
Can Rite Aid Recover from a Potential Second Bankruptcy?
Rite Aid’s potential emergence from a second bankruptcy is not guaranteed, but it is possible under the right conditions. Much like its first Chapter 11 bankruptcy filing in 2023, the company could restructure its debt, close underperforming stores, and seek new financing to help stabilize operations. If Rite Aid manages to negotiate with creditors, sell assets, and secure necessary funding (as it did with the $2.5 billion in exit financing after its first bankruptcy), it could potentially emerge as a leaner, more financially stable entity.
However, success would depend on several factors:
- Restructuring Efforts: Rite Aid would need a well-executed plan to reduce its liabilities and streamline operations. This could include closing more stores, selling assets, or possibly shifting its business model to focus more on profitable areas.
- Cash Flow and Debt Management: The company would need to demonstrate an ability to generate sufficient cash flow to meet operational needs and service any remaining debt.
- Market Conditions: The retail and pharmacy industries are facing growing competition, particularly from larger chains and online retailers. Rite Aid’s ability to adapt to these changing conditions would play a critical role in its ability to survive and thrive post-bankruptcy.
Although the path is uncertain, Rite Aid has a track record of emerging from bankruptcy before, so it’s not out of the question, but it would require a combination of strategic decisions and favorable market conditions.