Rite Aid Goes Bust...West Coast Stores??

[Romr123]

exactly right--this is essentially a prepackaged bankruptcy to get RA out of the opioid lawsuit, out from under ANY unwanted leases.

Feels quite similar to the bankruptcies done by GM and Chrysler in 2009--we were for a couple months before the actual bankruptcy getting every creditor that we wanted to continue to go-forward with paid so we could start off with a clean slate. Left behind in that were the labor contracts and the old disused plants (which went into something called the Racer Trust and have been slowly being redeveloped since).

[ClownLoach]

exactly right--this is essentially a prepackaged bankruptcy to get RA out of the opioid lawsuit, out from under ANY unwanted leases.

Feels quite similar to the bankruptcies done by GM and Chrysler in 2009--we were for a couple months before the actual bankruptcy getting every creditor that we wanted to continue to go-forward with paid so we could start off with a clean slate. Left behind in that were the labor contracts and the old disused plants (which went into something called the Racer Trust and have been slowly being redeveloped since).

Exactly.

MODS - Can we get this inaccurate and irresponsible subject line changed ASAP? They did not "go bust." We have seen this community quoted in news articles, and leaving this false and misleading headline is misinformation that could be cited elsewhere. If they threw in the towel and hung the black and yellow banners on every building that would be "going bust." We cannot allow the credibility of the discussions here to be turned into tabloid fodder.

[ClownLoach]

Someone will probably pick up the Thrifty ice cream brand-although it may no longer be made in California. When Albertsons made an attempt to buy RiteAid, they were planning to move the ice cream production to Albertsons dairy plant in Phoenix.

Sounds like the Thrifty Ice Cream subsidiary is doing just fine in El Monte and has room to expand and grow thus becoming even more profitable. They haven't tapped all their capacity thus no reason to close such a successful business. The plant is the business. I've already explained the sale elsewhere in the prepackaged bankruptcy deal. See the Eater LA article today. (Also this article seems to indicate Thrifty Ice Cream was not always owned by Thrifty Drug Stores either and has changed hands a few times but eventually reunited with the stores, so in the event it later was separated out that wouldn't be "new to them" in how they operate. They already act like they are their own company that just gets occasional phone calls and emails from Pennsylvania owners). I also doubt that Albertsons would have changed anything as this is not a brand manufactured somewhere, but rather a self contained business operation with proprietary recipes and equipment. That merger deal didn't get anywhere near far enough along to make actual decisions about something as granular as this plant and closure was probably a rumor from concerned workers.

[buckguy]

I haven't seen any media coverage saying that they will get out from under the lawsuits. It's more than just the federal suit, there are state and local suits, so it's complicated. The possibility of them being able to walk away from the settlement is implied in this article from the New York Times which notes rather awkwardly that Mallinkrodt was able to avoid most of their judgment in bankruptcy: https://www.nytimes.com/2023/10/15/busi ... uptcy.html

The article does better at articulating the liability of Rite Aid and others: filling prescriptions that obviously were obviously excessive in terms of dosage and frequency. You don't have to get into the moral panic debates about addiction to recognize how these businesses had liability.

The prepackaged bankruptcy is likely to be approved by the court unless some major creditor emerges as a an opponent or their are problems with the specifics of the agreement. A business that generates cash, even in its weakened condition, should theoretically be able to make a good faith effort at paying off debt, esp. if it's not encumbered by leases for stores they've closed. The one downside here is that they could easily turn into Southeastern Grocery, which ultimately didn't have enough capital to remake itself.

[ClownLoach]

I haven't seen any media coverage saying that they will get out from under the lawsuits. It's more than just the federal suit, there are state and local suits, so it's complicated. The possibility of them being able to walk away from the settlement is implied in this article from the New York Times which notes rather awkwardly that Mallinkrodt was able to avoid most of their judgment in bankruptcy: https://www.nytimes.com/2023/10/15/busi ... uptcy.html

The article does better at articulating the liability of Rite Aid and others: filling prescriptions that obviously were obviously excessive in terms of dosage and frequency. You don't have to get into the moral panic debates about addiction to recognize how these businesses had liability.

The prepackaged bankruptcy is likely to be approved by the court unless some major creditor emerges as a an opponent or their are problems with the specifics of the agreement. A business that generates cash, even in its weakened condition, should theoretically be able to make a good faith effort at paying off debt, esp. if it's not encumbered by leases for stores they've closed. The one downside here is that they could easily turn into Southeastern Grocery, which ultimately didn't have enough capital to remake itself.

The entire concept is that the company legally is dissolved, and assets sold to a new entity owned by the creditors free and clear. They can seize peg hooks and old gondolas in the closed stores. There is already precedent for companies to successfully bankrupt themselves out of liability here and the creditors have deeper pockets to fight off attempts to push back on the courts to firmly cement the previous precedents. The bankruptcy Court discharges state and local lawsuits and judgments daily and won't do different here... No judge likes being overturned on appeal. Anything else is just speculation that carries the same odds as a Martian invasion of San Francisco tomorrow night... You can't rule out, but the likelihood is pretty slim.

[Alpha8472]

The number of opioid prescriptions has dropped significantly in the past several years. Norco used to be one of the most commonly filled prescriptions. Now it is rare to get a Norco prescription.

The drug distributers are limiting supplies to pharmacies. There are times when the pharmacy can't get any Norco in stock.

The problem with filling opioid prescriptions was that there was not enough staffing to call and verify every single Norco prescription years ago. With paper prescriptions it was easy to create fake prescriptions. Later on, electronic prescriptions made spotting fake prescriptions much easier. They should eliminate paper prescriptions for opioid medications. Ten years ago Norco prescriptions could be left on the pharmacy voice-mail and that was good enough to fill a prescription.

The pharmacy business has changed dramatically in less than 10 years. Now trying to fill a Norco prescription has many hurdles to jump through. Even if you have a legitimate reason for a prescription, it is still very difficult to find a pharmacy that can dispense it.

Why are doctors not being punished for writing too many opioid prescriptions? Why doesn't the government go after the doctors? Why try to get money from pharmacy chains?

[storewanderer]

Why are doctors not being punished for writing too many opioid prescriptions? Why doesn't the government go after the doctors? Why try to get money from pharmacy chains?

This is my question... I may be biased toward the retailers but I have always wondered why the pharmacies take the blame here. I think the biggest pharmacy chains see taking the blame for this as a way to squeeze out many smaller pharmacy operators who cannot afford it. And so far since this practice of governments suing pharmacies for opioid dispensing has occurred numerous smaller operators have closed pharmacy and sold to CVS or Walgreens. So for CVS and Walgreens this feels like an investment to "push out more of the competition."

I also wonder if this opioid thing has driven many grocers out of the pharmacy business. Like if grocer X had pharmacies but sells them to Walgreens, in the sale agreement Walgreens can somehow say since we assumed grocer X pharmacies, and we already settled a consolidated with numerous governments opioid suit, that is a closed matter and no government can go after grocer X for opioid issues in its now closed pharmacies.

[submariner]

Let's keep some of this speculation reigned in a bit...

[ClownLoach]

Let's keep some of this speculation reigned in a bit...

Although this is partially speculation, I do think it's worthy to mention that the lease rejection list was available and complete immediately instead of months down the road which further indicates this bankruptcy is really more a planned reorganization versus the "gone bust chaos" that is typical of other retailers where there was no intent to survive but rather just plotting to collect as many paychecks for the executives as possible before the wheels finally fell off (ahem, BB&B, Toys R Us, and so forth). I don't know anyone at Rite Aid nor have ever worked there but it looks like they put in a healthy effort over these weeks of rumors to build a very well crafted restructuring plan that salvages the profitable parts of the organization and allows for a new future with clean books. The transparency is far better than most retail bankruptcies where there is usually smoke and mirrors until one day it's converted to a liquidation and the black and yellow banners of defeat are raised. I do not see that at Rite Aid at all.

One interesting factor I do see is that the closing store filing indicates that the leases and stores are abandoned as of 10/15/2023 which means that they could theoretically just pull everything out rapidly and transfer it elsewhere then close "instantly" if necessary or if a landlord were to demand something to that effect. So I wonder how many, if any, of these closures will result in closing sales versus just straight up disappearing into the night?

There will be a "Wave 2" of store closures and that will stem from the typical post bankruptcy filing back and forth with landlords which is different from advanced decisions by the company. They assuredly have a list of stores that are unprofitable or projected as such in the future, and they'll use the BK as leverage to try to see if landlords will cave and give them big rent reductions that enable them to stay. That is the "400+ store closures" we have read speculation about, which is likely a bigger number like 600 or so targeted but they probably expect a third of landlords to decide it's better to keep Rite Aid with lower rent versus pay the costs of fixing up the site and marketing it to other retailers which may or many not pay much more than RAD is proposing for a new lease. I would imagine we won't hear the rest of those stores until about 90 days go by, although there may be some one-off situations where the company and landlord decide they're too far apart and both parties want to separate ASAP instead of waiting for the lease rejection deadline filing.

[storewanderer]

Let's keep some of this speculation reigned in a bit...

Although this is partially speculation, I do think it's worthy to mention that the lease rejection list was available and complete immediately instead of months down the road which further indicates this bankruptcy is really more a planned reorganization versus the "gone bust chaos" that is typical of other retailers where there was no intent to survive but rather just plotting to collect as many paychecks for the executives as possible before the wheels finally fell off (ahem, BB&B, Toys R Us, and so forth). I don't know anyone at Rite Aid nor have ever worked there but it looks like they put in a healthy effort over these weeks of rumors to build a very well crafted restructuring plan that salvages the profitable parts of the organization and allows for a new future with clean books. The transparency is far better than most retail bankruptcies where there is usually smoke and mirrors until one day it's converted to a liquidation and the black and yellow banners of defeat are raised. I do not see that at Rite Aid at all.

One interesting factor I do see is that the closing store filing indicates that the leases and stores are abandoned as of 10/15/2023 which means that they could theoretically just pull everything out rapidly and transfer it elsewhere then close "instantly" if necessary or if a landlord were to demand something to that effect. So I wonder how many, if any, of these closures will result in closing sales versus just straight up disappearing into the night?

There will be a "Wave 2" of store closures and that will stem from the typical post bankruptcy filing back and forth with landlords which is different from advanced decisions by the company. They assuredly have a list of stores that are unprofitable or projected as such in the future, and they'll use the BK as leverage to try to see if landlords will cave and give them big rent reductions that enable them to stay. That is the "400+ store closures" we have read speculation about, which is likely a bigger number like 600 or so targeted but they probably expect a third of landlords to decide it's better to keep Rite Aid with lower rent versus pay the costs of fixing up the site and marketing it to other retailers which may or many not pay much more than RAD is proposing for a new lease. I would imagine we won't hear the rest of those stores until about 90 days go by, although there may be some one-off situations where the company and landlord decide they're too far apart and both parties want to separate ASAP instead of waiting for the lease rejection deadline filing.

I think the CFO is running the show and put this whole thing together. Also the only reason this ship stayed afloat as long as it did. The only thing the "board of directors" has done right is keep that CFO.

They would have been out of business years ago without that long term CFO. But given the common shareholders end up wiped out here, the CFO is not going to be very well liked when all is said and done. But he will be the reason the company stays in business. And as bad as it is to wipe out the equity of the common shareholders, it would be even worse to also end up out of business/firing all the employees along with that equity loss. At least this way parts of the business can continue and employment can continue.

The biggest risk I see is if the DOJ takes them out and basically destroys the company to try and get what it feels it is owed in the lawsuits over the opioids. This is the one thing hanging over Rite Aid that wasn't hanging over all those other retail bankruptcies. In theory that is a liability of the old pre-bankrupt enterprise, but the way this government operates, they will use any recourse necessary to get this money even if it somehow means bending the law. I hope I'm wrong here and they just take their lawsuit and go away.