Rite Aid To File Chapter 11 Bankruptcy: What To Know

Rite Aid is in financial trouble, and with over 1000 federal, as well as a number of state-level lawsuits over allegations that the company contributed to the opioid crisis by oversupplying painkillers, etc., it is preparing to file a Chapter 11 bankruptcy. That means that it will be the Debtor-In-Possession and involved in reorganizing, which could mean systematically closing its doors completely, selling its assets (including under-market leases) or reorganizing its debt to keep some of its stores operating. Already, it has closed upwards of 200+ stores and it is expected to close at least 400-500 of its 2,100 stores. Rite Aid is the third-largest U.S. drugstore chain. So, affected Landlords, trade creditor/suppliers, employees (mostly represented by a Union) and others should be preparing for the bankruptcy.

As for landlords and trade creditors, they should:

1. 1. Document monies owed and track payments, status of deposits, product return, timing of product sales and deliveries, etc. If a deposit is applied before the bankruptcy filing, it is a different story than if the landlord is holding deposit funds and is owed monies at the moment of the bankruptcy filing. Also, as trade creditors often can reclaim delivered but unpaid-for inventory, having documentation on this is important.
2. 2. As the contracts/purchase orders/invoices will govern how Rite Aid's debts are handled in the bankruptcy, having the fully executed contract available and reviewing it now will put landlords and trade creditors ahead of the bankruptcy filing. And, if Rite Aid decides to continue operating, certain trade creditors may be designated critical vendors and receive up-front consideration to continue providing product or services. Those vendors and landlords may be able to demand and receive sums due pre-petition, as well as attorneys fees and costs. Those trade creditors and landlords may be able to (or requested to) renegotiate certain terms of their contracts going forward.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.