Bankrupt pharmacy chain Rite Aid Corp. agreed to begin court-supervised mediation with lower ranking creditors, including groups that blame the company for contributing to America’s opioid addiction crisis.
The company, backed by senior lenders, will negotiate with unsecured creditors about how to end the retailer’s insolvency case and on a potential loan package to fund the company’s exit from bankruptcy, Rite Aid attorney Aparna Yenamandra said in court Tuesday. The company will try reach a deal before the end of January, Yenamandra said.
The pharmacy chain held a video court hearing Tuesday to ask US Bankruptcy Judge Michael Kaplan to approve a $3.25 billion loan package to refinance older debt and to help pay for the company’s reorganization case.
Rite Aid is trying to sell itself while under court protection in order to pay creditors owed billions of dollars. Should the company fail to find a buyer willing to keep at least part of the chain open, Rite Aid would be forced to liquidate. When retailers liquidate in bankruptcy, lower-ranking creditors are typically paid far less than if the company successfully reorganizes.
“To be successful parties have to be available and talk to one another in good faith,” said Arik Preis, a lawyer who represents the groups that are suing Rite Aid for its role in the opioid epidemic.
Like other US pharmacies, Rite Aid has grappled with more than 1,600 opioid-related lawsuits, according to court papers. The high cost of defending itself and the potential for losing some of the suits put pressure on the company’s liquidity before it filed for bankruptcy in October.
Rite Aid will be negotiating with two court-supervised committees: a panel of unsecured creditors made up of lower-ranking debt holders like suppliers, and a committee of people suing the company for opioid-related expenses and other claims. The latter group is primarily made up of opioid claimants, and includes individual victims, an emergency room physician, a New York-based hospital and a national group of insurance firms.
Other major pharmacy chains have paid out billions of dollars to settle opioid disputes. Last year, CVS Health Corp. and Walgreens Boots Alliance Inc. agreed to pay around $10 billion to resolve thousands of lawsuits accusing the pharmacy owners of mishandling opioid painkillers. Rite Aid hasn’t paid a similar settlement.
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