Rite Aid Bankruptcy Speculation

[mburb1981]

It's official.

https://www.axios.com/2023/10/16/rite-a ... ing-stores

[storewanderer]

Was pretty somber in the store I visited this weekend. No Christmas items, very limited replenishment in the past month, hardly any Halloween, multiple empty aisles.

No surprise. Now we will see what else closes.

At least this replacement CEO says the company plans to stay in business. It is good to make that clear right now, given what some of the previous media reports speculating were saying.

[ClownLoach]

Was pretty somber in the store I visited this weekend. No Christmas items, very limited replenishment in the past month, hardly any Halloween, multiple empty aisles.

No surprise. Now we will see what else closes.

At least this replacement CEO says the company plans to stay in business. It is good to make that clear right now, given what some of the previous media reports speculating were saying.

The fact they got $3.45B in funding makes it clear they will survive and exit bankruptcy. That is probably why they waited so long. Usually DIP funding even for a company their size is $300M-$500M and if they overspend it they wind up in a bankruptcy auction where the top bidder is always either Hilco, Gordon Bros or Great American liquidators.

In what is otherwise very bad news, the DIP funding is huge, excellent news.

[storewanderer]

Was pretty somber in the store I visited this weekend. No Christmas items, very limited replenishment in the past month, hardly any Halloween, multiple empty aisles.

No surprise. Now we will see what else closes.

At least this replacement CEO says the company plans to stay in business. It is good to make that clear right now, given what some of the previous media reports speculating were saying.

The fact they got $3.45B in funding makes it clear they will survive and exit bankruptcy. That is probably why they waited so long. Usually DIP funding even for a company their size is $300M-$500M and if they overspend it they wind up in a bankruptcy auction where the top bidder is always either Hilco, Gordon Bros or Great American liquidators.

In what is otherwise very bad news, the DIP funding is huge, excellent news.

Because the underlying business... even as it shrinks and shrinks... has quite a bit of value. This is how they've limped it along for the past 23 years since the big accounting scandal.

[babs]

Was pretty somber in the store I visited this weekend. No Christmas items, very limited replenishment in the past month, hardly any Halloween, multiple empty aisles.

No surprise. Now we will see what else closes.

At least this replacement CEO says the company plans to stay in business. It is good to make that clear right now, given what some of the previous media reports speculating were saying.

The fact they got $3.45B in funding makes it clear they will survive and exit bankruptcy. That is probably why they waited so long. Usually DIP funding even for a company their size is $300M-$500M and if they overspend it they wind up in a bankruptcy auction where the top bidder is always either Hilco, Gordon Bros or Great American liquidators.

In what is otherwise very bad news, the DIP funding is huge, excellent news.

Because the underlying business... even as it shrinks and shrinks... has quite a bit of value. This is how they've limped it along for the past 23 years since the big accounting scandal.

I'm not positive they survive. When they sell a pharmacy file, anyone have a clue what that's worth per customer? I'm wondering if that's worth a few billion.

[storewanderer]

The fact they got $3.45B in funding makes it clear they will survive and exit bankruptcy. That is probably why they waited so long. Usually DIP funding even for a company their size is $300M-$500M and if they overspend it they wind up in a bankruptcy auction where the top bidder is always either Hilco, Gordon Bros or Great American liquidators.

In what is otherwise very bad news, the DIP funding is huge, excellent news.

Because the underlying business... even as it shrinks and shrinks... has quite a bit of value. This is how they've limped it along for the past 23 years since the big accounting scandal.

I'm not positive they survive. When they sell a pharmacy file, anyone have a clue what that's worth per customer? I'm wondering if that's worth a few billion.

There are a lot of variables based on individual pharmacy performance/region, but it can be as little as just a few dollars per file. They can also age off the files (for instance maybe a store has 20,000 files but 15,000 of those haven't been filled in 9 months) so files less likely to come back in and fill again have less value than more active files.

$3 billion / 2,000 stores is $1.5 million per store. Given most of these are leased stores that seems high.

An interesting bankruptcy play would be to downsize a lot of stores out of "anchor" spaces and into smaller in-line spaces in the same shopping centers. Sort of like back to the future (of Rite Aid before the late 90's with a bunch of not pretty non-anchor strip mall stores).

[ClownLoach]

The fact they got $3.45B in funding makes it clear they will survive and exit bankruptcy. That is probably why they waited so long. Usually DIP funding even for a company their size is $300M-$500M and if they overspend it they wind up in a bankruptcy auction where the top bidder is always either Hilco, Gordon Bros or Great American liquidators.

In what is otherwise very bad news, the DIP funding is huge, excellent news.

Because the underlying business... even as it shrinks and shrinks... has quite a bit of value. This is how they've limped it along for the past 23 years since the big accounting scandal.

I'm not positive they survive. When they sell a pharmacy file, anyone have a clue what that's worth per customer? I'm wondering if that's worth a few billion.

My point is they have $3.45B in new money to spend until they get out of bankruptcy. Furthermore, CNBC is reporting they already have arrangements agree upon with creditors. So this is effectively a prepackaged bankruptcy and there's no reason not to easily survive the process. If it wasn't for needing to know the cost of the possible opiate judgments (which obviously the bankruptcy will nullify) they theoretically could have filed and exited within 24 hours. This is very good news and indicates the creditors believe it's a viable entity.

Right now they just need to complete a few simple things. First, decide what stores are still closing and get that all done at once (assets sold to liquidators, files sold, and leases canceled). Second, they cancel the opiate case. Third, they leave bankruptcy since they already made all the other necessary deals.

This is far better than I thought it would be.

[ClownLoach]

Because the underlying business... even as it shrinks and shrinks... has quite a bit of value. This is how they've limped it along for the past 23 years since the big accounting scandal.

I'm not positive they survive. When they sell a pharmacy file, anyone have a clue what that's worth per customer? I'm wondering if that's worth a few billion.

$3 billion / 2,000 stores is $1.5 million per store. Given most of these are leased stores that seems high.

An interesting bankruptcy play would be to downsize a lot of stores out of "anchor" spaces and into smaller in-line spaces in the same shopping centers. Sort of like back to the future (of Rite Aid before the late 90's with a bunch of not pretty non-anchor strip mall stores).

$3 billion is just the loaned operating funds to get them through bankruptcy. Frankly that's a piece of cake and most of that money won't need to be used since they already have made arrangements with their creditors.

For in line spaces etc. They would have had to replace the units before the bankruptcy. Otherwise they would have to close and liquidate the stores while in bankruptcy, then reopen in new locations after bankruptcy. They're not going to be able to sign any new leases or open new stores while in bankruptcy. So at this point all they can do is exit old stores and frankly it's their last chance to close unwanted stores. Whatever they exit BK with is the go forward chain.

[babs]

Because the underlying business... even as it shrinks and shrinks... has quite a bit of value. This is how they've limped it along for the past 23 years since the big accounting scandal.

I'm not positive they survive. When they sell a pharmacy file, anyone have a clue what that's worth per customer? I'm wondering if that's worth a few billion.

My point is they have $3.45B in new money to spend until they get out of bankruptcy. Furthermore, CNBC is reporting they already have arrangements agree upon with creditors. So this is effectively a prepackaged bankruptcy and there's no reason not to easily survive the process. If it wasn't for needing to know the cost of the possible opiate judgments (which obviously the bankruptcy will nullify) they theoretically could have filed and exited within 24 hours. This is very good news and indicates the creditors believe it's a viable entity.

Right now they just need to complete a few simple things. First, decide what stores are still closing and get that all done at once (assets sold to liquidators, files sold, and leases canceled). Second, they cancel the opiate case. Third, they leave bankruptcy since they already made all the other necessary deals.

This is far better than I thought it would be.

Once you file for bankruptcy, you no longer control your destiny. You maybe right. But the court is in charge, not the company.

[ClownLoach]

I'm not positive they survive. When they sell a pharmacy file, anyone have a clue what that's worth per customer? I'm wondering if that's worth a few billion.

My point is they have $3.45B in new money to spend until they get out of bankruptcy. Furthermore, CNBC is reporting they already have arrangements agree upon with creditors. So this is effectively a prepackaged bankruptcy and there's no reason not to easily survive the process. If it wasn't for needing to know the cost of the possible opiate judgments (which obviously the bankruptcy will nullify) they theoretically could have filed and exited within 24 hours. This is very good news and indicates the creditors believe it's a viable entity.

Right now they just need to complete a few simple things. First, decide what stores are still closing and get that all done at once (assets sold to liquidators, files sold, and leases canceled). Second, they cancel the opiate case. Third, they leave bankruptcy since they already made all the other necessary deals.

This is far better than I thought it would be.

Once you file for bankruptcy, you no longer control your destiny. You maybe right. But the court is in charge, not the company.

Actually, if you have already made agreements with all of your creditors then you control your destiny. The problem is when companies file with angry creditors who weren't part of the discussion, and they basically say we can only pay 2 cents on the dollar and would like to walk out debt free. Meanwhile they have enough money to run the company for like 47 days because they couldn't round up adequate DIP funding either and they run out... That's when the creditors wind up being able to take over and force the liquidation of the company to pay themselves back. The creditors here don't want that apparently. The only real sticking point I see if the creditors are already in agreements is the opiate lawsuit which then puts the government in a ugly position; how bad would it look if the government forced the company out of business to pay them a judgment? I highly doubt that they want the headlines nationwide that they caused tens of thousands of job losses and such.

All things considered, I am pleasantly surprised that they took all this time where we heard rampant speculation and arranged for more than adequate funding. They allegedly made agreements with creditors. They seem to have done their homework, and even though they are still going to close more stores, probably where the landlords wouldn't make a deal to keep them, the law will allow them to exit every lease that they need to without any penalty. As we know from this board they had a large, public list of closed locations where they were still paying rent that likely was costing them millions of dollars a month and they stop paying that as soon as they submit the lease rejection list.