Now, both companies are preparing to emerge from Chapter 11 with reduced footprints, decreased debt and new leadership.
Rite Aid
In a Sept. 3 press release announcing the completion of its financial restructuring, Philadelphia-based Rite Aid described itself as a “stronger company with a rightsized store footprint, more efficient operating model, significantly less debt and additional financial resources.”
Under the reorganization plan approved earlier this summer by U.S. Bankruptcy Judge Michael Kaplan in Trenton, Rite Aid will cut its debt by about $2 billion and turn over control to its key creditors.
In emerging from bankruptcy, Rite Aid will receive $2.5 billion in exit financing provided by its lenders and operate as a private company. All of Rite Aid’s existing common shares were cancelled as part of the reorganization plan.
Rite Aid filed for bankruptcy in October 2023, listing estimated assets and liabilities in the range of $1 billion to $10 billion.
Since then, it has closed more than 780 pharmacies nationwide including three dozen locations in New Jersey. During several rounds of closures as part of the court-supervised process, Rite Aid shrank its New Jersey presence to 61 stores.
Serving as real estate advisor to Rite Aid Corp., A&G Real Estate Partners announced plans in October 2023 to market 78 Rite Aid and Bartell Drugs neighborhood pharmacy leases, as well as 21 fee-owned properties. - A&G REAL ESTATE
Rite Aid which had more than 2,100 stores when it filed for bankruptcy will emerge from the process with about 1,300 locations. As of Sept. 6, the chain has 1,416 locations nationwide, according to its website.
Legal woes, executive changes
In addition to optimizing its vast retail footprint, Rite Aid has sold its pharmacy benefits company and negotiated settlements with lenders and creditors.
Rite Aid’s bankruptcy came amid falling sales and heavy debt from 1,600 lawsuits including one from the federal government accusing the company of contributing to the deadly U.S. opioid epidemic.
Following its Chapter 11 bankruptcy filing in June, Coach USA received court approval to sell its bus lines and is auctioning of bus terminals. Click here to read the story.
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The approved restructuring will provide $47.5 million to junior creditors, including individuals and local governments that sued the company, alleging that it ignored red flags when filling suspicious prescriptions for addictive pain drugs.
Rite Aid also named company veteran Matt Schroeder as its new chief executive officer. Schroeder joined the company in 2000 as a vice president of accounting and rose through the ranks to become chief financial officer in 2019.
He replaces Jeffrey Stein, who stepped down as CEO and chief restructuring officer in connection with the company’s exit from Chapter 11.
A new beginning
Stein said, “It has been a privilege to serve as CEO and CRO of Rite Aid alongside the best team in the business. I am proud of what we accomplished in strengthening the company’s foundation and believe Rite Aid is well-positioned for future success. I look forward to supporting Matt as he transitions into the CEO role.”
The outgoing leader also said he believes the emergency marks a new beginning for Rite Aid, enabling it to “move forward as a significantly transformed, stronger and more efficient company.”
Schroeder commented, “I am honored to lead Rite Aid on its journey as we continue serving our customers and communities. Thanks to the dedication of the entire organization, we are beginning our next phase as a transformed company. I see Rite Aid’s remarkable potential, and I look forward to working with the team as we remain committed to our purpose of helping our customers achieve whole health for life.”
Red Lobster
After no other bidders came forward, an entity made up of Red Lobster’s lenders will acquire the struggling seafood chain out of bankruptcy.
As part of the plan approved Sept. 5, RL Purchaser LLC a new group organized and controlled by New York-based Fortress Credit Corp. will pay $375 million for the Orlando-headquartered brand’s remaining assets.
In May, Red Lobster filed for Chapter 11 relief, just days after it shuttered nearly 100 locations nationwide, including four restaurants in New Jersey. It still remains the largest seafood restaurant chain in the U.S., with about 570 locations. - PROVIDED BY RED LOBSTER
Following the buyout’s expected close later this month, former P.F. Chang’s CEO Damola Adamolekun will take the helm of Red Lobster. Jonathan Tibus, who was the company’s fifth CEO since 2021 and held the position during the Chapter 11 process, will step down.
Red Lobster will also continue to operate as an independent company.
In recent years, the chain has grappled with a significant debt load, executive turnover and unfavorable lease terms. Last year’s all-you-can-eat shrimp promotion also resulted in a major loss for the company after it was permanently added to the menu.
In the red (lobster)
In its petition, Red Lobster reported a 30% drop in guests since 2019. It had a mere $30 million in cash on hand against more than $1 billion in debt to thousands of creditors.
Fortress is also the owner of SPB Hospitality, an umbrella company whose portfolio includes Old Chicago Pizza + Taproom, Krystal, Logan’s Roadhouse, J. Alexander’s, Gordon Biersch Brewery Restaurant, Rock Bottom Restaurant & Brewery and Ragtime Tavern.
Looking ahead
In a statement, Adamolekun said, “This is a great day for Red Lobster. With our new backers, we have a comprehensive and long-term investment plan including a commitment of more than $60 million in new funding that will help to reinvigorate the iconic brand while keeping the best of its history.”
He said, “Red Lobster has a tremendous future, and I cannot wait to get started on our plan with the Company's more than 30,000 team members across the USA and Canada.”
Tibus added, “I'm proud of what Red Lobster has achieved during this restructuring the Company will emerge from Chapter 11 stronger financially and operationally, and with new backers who are resolutely focused on investment and growth. I'm incredibly grateful for the support we've received from our team members and diners, and from so many of our landlords and vendors throughout this process. I'm looking forward to cheering on Red Lobster as an ardent fan in the years ahead."
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