Rite Aid (RAD) filed for bankruptcy protection on Sunday night, further weighing on a stock that had already tanked as declining sales and a looming opioid lawsuit have hung over the retail pharmacy chain.
The company said its Chapter 11 bankruptcy filing will help resolve litigation claims in an “equitable manner” after the Department of Justice filed a complaint against Rite Aid in March for its role in the opioid crisis. The complaint alleged Rite Aid filled “hundreds of thousands” of prescriptions that didn’t meet legal requirements.
Rite Aid also believes filing for Chapter 11 will help it trim its retail footprint. In the filing, Rite Aid explained that the bankruptcy process will help it walk away from leases at undesirable locations, noting that the company is currently “burdened” by unprofitable stores that it can’t exit.
“The ability to reject leases will allow the company to rationalize the store footprint with greater flexibility,” Rite Aid wrote in the filing. “It can exit unprofitable locations, shed dead rent and use the threat of lease rejection to negotiate better lease terms.”
A Wall Street Journal report that Rite Aid would close 400 to 500 stores, sent the stock stumbling at the end of September.
Rite Aid, which once had a market cap of nearly $13 billion in 1998, filed for bankruptcy on Sunday with a market cap under $40 million. Shares traded about 6% lower in pre-market trading Monday before being halted.
Rite Aid said its raised $3.45 billion in new financing to keep operating while going through the bankruptcy process. The company also hired a new CEO, Jeffrey Stein, who will also serve as the company’s chief restructuring officer.
“Rite Aid has served customers and communities across our country for more than 60 years, and the important actions we are taking today will enable us to move ahead as a stronger company,” Stein said in the release.
Josh Schafer is a reporter for Yahoo Finance.
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