Rite Aid: Chapter 11 Cuts $2B+ Debt After 500+ Closures

Rite Aid Corporation, once the third-largest pharmacy chain in America, filed for chapter 11 bankruptcy on October 15, 2023, burdened by $4 billion in funded debt and more than 1,600 opioid lawsuits. The company, which operated over 2,100 stores in 17 states and employed more than 40,000 people, was one of the large pharmacy chains to file chapter 11 without a prearranged opioid settlement with plaintiffs.

Rite Aid emerged from bankruptcy in September 2024 with $2 billion in debt eliminated and $2.5 billion in exit financing. Eight months later, the company filed for bankruptcy again. By October 2025, Rite Aid had shuttered its final 89 stores, ending a 63-year history in complete liquidation.

Debtor(s)	Rite Aid Corporation (First Case); New Rite Aid, LLC (Second Case)
Case Number	23-18993; 25-14861
Court	U.S. Bankruptcy Court, District of New Jersey
Judge	Hon. Michael B. Kaplan
Petition Date	October 15, 2023; May 5, 2025
First Emergence	September 3, 2024
Outcome	Complete liquidation (final stores closed October 2025)
Pre-Filing Debt	~$4 billion
Debt Eliminated (First Case)	~$2 billion
Exit Financing (First Case)	$2.5 billion
DIP Facility	DIP Financing (First Case): $3.45 billion (DIP Financing (Second Case): $1.94 billion)
Opioid Lawsuits	1,600+
DOJ Settlement	$7.5M cash + $401.8M allowed claim
Elixir PBM Sale	$576.5 million to MedImpact
Store Count (Peak)	5,000+
Store Count (Final)	0 (October 2025)
Preference Actions Filed	~950

Background

Alex Grass founded Rite Aid in 1962 as Thrift D Discount Center in Scranton, Pennsylvania, building on his earlier venture, Rack Rite Distributors, which he had launched in 1958. The company expanded rapidly throughout the 1960s and 1970s, eventually rebranding as Rite Aid Corporation. By 1983, Rite Aid became the first drugstore chain to reach $1 billion in sales. Under his leadership as CEO from 1962 to 1995, Rite Aid grew into one of the largest U.S. pharmacy chains.

The company's growth accelerated through strategic acquisitions. The purchase of Thrifty PayLess in 1996 and the Brooks and Eckerd chains in 2007 pushed Rite Aid's store count past 5,000 locations at its peak, making it the nation's largest drugstore chain by store count and second-largest by sales. By 1995, Rite Aid had claimed the number-one position in store count among American pharmacies—a status that would prove difficult to maintain as competition intensified.

Prior to bankruptcy, Rite Aid operated two core business segments. The Retail Pharmacy segment comprised the brick-and-mortar stores offering prescription services, front-end merchandise (cosmetics, household essentials, over-the-counter medications), and healthcare services including immunizations and point-of-care testing. The Pharmacy Services segment, organized under the Elixir brand, provided comprehensive pharmacy benefit management (PBM) offerings, mail-order pharmacy, specialty pharmacy, and Medicare Part D plan administration. In fiscal year 2023, the company reported $24.1 billion in revenue.

Prepetition Challenges

Rite Aid's path to bankruptcy can be traced in part to the failed Walgreens merger and its aftermath. In 2015, Walgreens announced a $9.4 billion acquisition bid for Rite Aid, which would have combined the second and third-largest pharmacy chains. However, FTC antitrust concerns blocked the full merger. Instead, Walgreens acquired 1,932 Rite Aid stores for $4.375 billion in a partial transaction completed in March 2018, along with three distribution centers. That same year, a potential merger with Albertsons collapsed, leaving the remaining Rite Aid burdened with debt and a diminished competitive position.

The company that emerged from the Walgreens transaction still carried significant debt but had fewer stores and less scale to negotiate favorable terms with suppliers and PBMs.

Beyond the failed mergers, Rite Aid faced extensive opioid-related litigation. At the time of its bankruptcy filing, the company was defending more than 1,600 opioid lawsuits. On March 13, 2023, the U.S. Department of Justice filed a civil complaint accusing Rite Aid of ignoring "red flags" and inappropriately dispensing opioids in violation of the False Claims Act and Controlled Substances Act. Rite Aid was one of the large pharmacy chains to file chapter 11 without a prearranged agreement with opioid plaintiffs. A separate data breach class action (Margaret Bianucci, et al.) added another litigation matter. The breach, discovered in June 2024, affected approximately 2.2 million individuals. A proposed $6.8 million non-reversionary settlement fund—to be funded from Rite Aid's cyber insurance coverage—attracted over 56,000 claims, with final approval pending in the second bankruptcy proceeding.

Even as Rite Aid grappled with litigation, operational challenges mounted. The company faced declining front-end sales, a shifting reimbursement climate driven by PBM dynamics and preferred network arrangements, and intensifying competition from CVS, Walgreens, Walmart, Target, and Amazon. Cost-cutting measures proved insufficient to offset these headwinds. In the year ending September 2023, Rite Aid closed approximately 210 stores, yet the company continued to carry costly rent obligations on vacated leases. Inflationary pressures and labor shortages further complicated efforts to maintain profitability.

In 2020, Rite Aid launched RxEvolution—a $700 million investment over two years designed to reposition pharmacists as frontline healthcare providers. The initiative trained 6,300 pharmacists as "integrative pharmacy specialists," expanded immunizations and point-of-care testing, and introduced the "Store of the Future" concept featuring virtual care rooms and enhanced clinical services. The strategy aimed to differentiate Rite Aid from larger competitors and attract a target demographic of Millennial and Gen X women. The company filed chapter 11 in October 2023.

First Chapter 11 Case (2023-2024)

Rite Aid Corporation filed its chapter 11 petition in the U.S. Bankruptcy Court for the District of New Jersey on October 15, 2023, assigned to Judge Michael B. Kaplan. The case proceeded through plan confirmation in August 2024 and emergence on September 3, 2024.

Capital Structure at Filing

At the time of filing, Rite Aid reported $3.999 billion in total funded debt obligations and approximately $524 million in liquidity—comprising $134 million in cash and $390 million in available borrowing capacity.

An ad hoc group of secured noteholders provided $3.45 billion in DIP financing to fund operations during the restructuring.

On November 2, 2023, the U.S. Trustee appointed an Official Committee of Unsecured Creditors (UCC) comprising nine members representing the diverse unsecured creditor constituency:

• Benderson Development Company, LLC
• McKesson Corporation
• Computershare Trust Company, N.A.
• United Food and Commercial Workers International Union
• MCS Advantage, Inc.
• Realty Income Corporation
• Loyd F. Schmuckley, Jr., Relator
• Humana Health Plan, Inc.
• Pension Benefit Guaranty Corporation

Akin Gump Strauss Hauer & Feld LLP served as lead counsel to the UCC, with FTI Consulting as financial advisor.

The DIP financing comprised a $2.85 billion asset-based revolving credit facility (SOFR + 3.25%), a $400 million FILO term loan (SOFR + 5.25%), and a $200 million new money term loan (SOFR + 7.50%). The court approved the financing on an interim basis shortly after filing, enabling operations to continue.

Simultaneously, Rite Aid appointed Jeffrey S. Stein as Chief Executive Officer and Chief Restructuring Officer. Stein, who brought three decades of restructuring experience to the role, succeeded interim CEO Elizabeth Burr and was tasked with guiding the company through the bankruptcy process.

A critical milestone in the first case was the sale of Rite Aid's Elixir Solutions PBM business. After marketing the business to more than 30 potential buyers, MedImpact Healthcare Systems emerged as the winning bidder. The court approved the sale in January 2024, and the transaction closed on February 1, 2024 for approximately $576.5 million. Rite Aid had originally acquired EnvisionRx (later Elixir) in 2015 for $2 billion—selling it at a steep discount to generate proceeds for the restructuring.

Emergence and Post-Bankruptcy Strategy

The bankruptcy court confirmed Rite Aid's reorganization plan on August 16, 2024, and the company emerged on September 3, 2024. Under the plan structure, only Class 5 (Senior Secured Notes Claims) was entitled to vote. That class overwhelmingly supported confirmation:

The restructuring eliminated approximately $2 billion in debt and provided $2.5 billion in exit financing. Bank of America, N.A. served as administrative agent, with BofA Securities as lead arranger. The lending syndicate included Wells Fargo, Capital One, PNC, MUFG, Fifth Third, ING Capital, and Truist as issuing banks. In addition to the primary exit facilities, the plan provided for $88 million in Exit 1.5 Lien Notes (SOFR + 7.00%, PIK for first 12 months then cash pay) and $350 million in Takeback Notes (15.00% PIK).

The exit facilities featured performance-based pricing grids tied to ABL availability. The ABL facility carried spreads ranging from SOFR + 2.75% (when availability exceeded 66.66% of commitments) to SOFR + 3.25% (below 33.33%), with an initial lock period at SOFR + 3.25%. The FILO facility spreads ranged from SOFR + 4.75% to SOFR + 5.25% on the same grid. The facilities required a 0.50% per annum commitment fee on unused amounts. FILO prepayment fees stepped down from 0.75% in Year 1 to 0.50% in Year 2, 0.25% in Year 3, and zero thereafter.

The ABL borrowing base comprised eligible accounts receivable (85% advance rate), eligible credit card receivables (90% advance rate), pharmaceutical and other inventory, and eligible script lists (capped at 32.5% of the borrowing base). Cash dominion was triggered when ABL availability fell below the greater of $335 million or 15% of the combined loan cap for three consecutive days. Letter of credit sublimits totaled $650 million across the issuing bank syndicate, with Bank of America and Wells Fargo each holding $125 million sublimits.

During the bankruptcy, Rite Aid closed more than 520 stores, leaving approximately 1,250 locations at emergence. The confirmed plan provided for the following treatment of claims:

A GUC Equity Trust was established to receive approximately 10% of certain assigned claims. The reorganized company emerged as a private entity owned by its former creditors.

The reorganization plan resolved the majority of Rite Aid's opioid litigation. The DOJ settlement, finalized in July 2024, required a $7.5 million cash payment and established a $401.8 million allowed unsecured claim for violations of the False Claims Act and Controlled Substances Act. An Opioid Settlement Agreement was integrated into the confirmed plan, addressing the thousands of lawsuits that had burdened the company. Rite Aid's approach—resolving opioid claims through bankruptcy—reflected the enforcement focus on pharmacy "corresponding responsibility" under the Controlled Substances Act.

Upon emergence, Rite Aid named Matt Schroeder as CEO. Schroeder, who had joined Rite Aid in 2000 and served as CFO since March 2019, was elevated to lead the post-bankruptcy company. Management articulated a strategy focused on delivering pharmacy services, streamlining front-end product lines, and leveraging pharmacists as frontline healthcare providers. Monthly operating reports showed a net loss of $(18.5 million) in August 2024 alone, with cumulative net losses during the case reaching $(215.9 million). The company's net worth deficit stood at $(3.56 billion), and revolving draws exceeding $1.2 billion.

The Vicious Cycle

Following the August 30, 2024 effective date, Rite Aid began implementing its post-emergence business plan. According to court filings from the second case, that plan was quickly "derailed by significant challenges."

Court filings highlighted Rite Aid's relationship with McKesson Corporation, the pharmaceutical supplier. Post-emergence, McKesson tightened trade terms—requiring cash in advance for deliveries and reducing credit availability. Other vendors similarly continued imposing restrictive trade terms after emergence. Access to incremental funding was delayed and limited. The filings described a sequence in which restrictive vendor terms reduced inventory, sales declined, and liquidity constraints increased.

Industry-wide pressures compounded these vendor challenges. The company faced elevated labor costs, declining reimbursement rates as Medicare Part D plans increasingly adopted preferred pharmacy networks, reduced front-end merchandise demand, and increased shrinkage (theft). Court filings also cited consumer shifts toward mail-order and digital pharmacy options and the impact of a large lease portfolio on working capital needs.

The company reduced debt by $2 billion and secured $2.5 billion in exit financing, and filed again eight months later.

Complete Liquidation (2025)

On May 5, 2025, New Rite Aid, LLC and affiliates filed for chapter 11 bankruptcy for the second time in less than two years. The case was again assigned to Judge Kaplan in Newark. Unlike the first case, which aimed at reorganization, the second case focused on complete liquidation.

On May 19, 2025, the U.S. Trustee appointed a reconstituted Official Committee of Unsecured Creditors for the second case, comprising nine members:

• RAD Sub-Trust A
• RAD Sub-Trust B
• AmerisourceBergen Drug Corporation
• Pension Benefit Guaranty Corporation
• Realty Income Corporation
• United Food and Commercial Workers International Union
• Iron Mountain Information Management, LLC
• Computershare Trust Company, N.A.
• Evergreen-Partners, LLC d/b/a Evergreen Trading

Willkie Farr & Gallagher LLP and Sidley Austin LLP served as co-counsel to the reconstituted UCC.

The second case proceeded through a bifurcated sale process. Phase 1, conducted in May 2025, auctioned pharmacy assets including prescription files and pharmacy inventory. Phase 2 addressed remaining assets including intellectual property, the historic Thrifty Ice Cream brand (sold to Hilrod Holdings L.P. for $19.2 million), technology assets, and real estate. Real property asset sales generated approximately $70 million in cash proceeds as of late August 2025. The pharmacy asset auction attracted multiple successful bidders:

In total, more than 1,000 locations' prescription files and pharmacy assets were transferred to competitors. On October 3, 2025, Rite Aid closed its final 89 stores, ending operations entirely. The last locations to close included stores in Bainbridge Island, Washington and Bend, Oregon. CVS acquired the final stores' prescription files, ending Rite Aid's 63-year operating history. The bankruptcy case remains pending as the court addresses plan confirmation and remaining estate matters.

In October 2025, the U.S. Trustee filed objections to the second case, arguing that the case should be dismissed or converted to chapter 7. The Trustee alleged "gross mismanagement," asserted that the plan was unconfirmable, and cited substantial loss or diminution of the estate.

The liquidation required rejection of hundreds of unexpired leases across multiple notices filed throughout the case. Under the proposed plan, general unsecured claims, existing equity interests, and § 510(b) claims are impaired and will receive no distribution—discharged, cancelled, and extinguished. Only prepetition FILO claims (Class 3) are slated to receive a pro rata share of the FILO cash distribution.

The restructuring generated substantial professional fees. Through September 2025, court filings showed Paul, Weiss, Rifkind, Wharton & Garrison (debtor's counsel) billed over $13.5 million; Alvarez & Marsal (financial advisor) exceeded $6.95 million; Guggenheim Securities (investment banker) reached $4.4 million; Cole Schotz (co-counsel) billed $2.86 million; and AlixPartners (UCC financial advisor) reached $1.31 million.

Separately, Trustee Thomas A. Pitta filed approximately 950 adversary proceedings in October 2025 seeking preference and fraudulent transfer recoveries under § 547, § 548, and § 550 of the Bankruptcy Code. Defendants included major consumer goods companies such as Pepsi-Cola Company, GNC Holdings, Canada Dry, Utz Quality Foods, Hain Celestial Group, and Revlon Consumer Products.

Industry Context

Rite Aid's bankruptcy occurred amid pharmacy industry consolidation. Over the past decade, the top three pharmacy chains have consolidated 50% of U.S. retail pharmacies. CVS's visit share grew from 41.9% to 44.0% between Q1 2023 and Q4 2024, while Walgreens' share increased from 49.2% to 50.4%. Smaller chains' share declined from 8.9% to 5.5% over the same period. The U.S. pharmacy market represents a $732 billion opportunity in 2024, projected to reach $1.7 trillion by 2033.

Rite Aid's bankruptcy coincided with broader industry retrenchment. CVS has closed more than 1,000 stores since 2022, and Walgreens announced plans to close 1,200 locations by 2027. Reimbursement pressures from PBMs and payors affect pharmacy chains. Competition from Amazon, Walmart, and mail-order pharmacies continues to intensify.

Rite Aid entered chapter 11 in October 2023 with $4 billion in funded debt and more than 1,600 opioid lawsuits, emerged in September 2024 with $2 billion in debt reduction and $2.5 billion in exit financing, and filed again in May 2025, leading to liquidation by October 2025.

Frequently Asked Questions

Why did Rite Aid file for bankruptcy?

Rite Aid filed in October 2023 burdened by $4 billion in funded debt, more than 1,600 opioid lawsuits, declining sales, and intense competition from larger chains. A failed $9.4 billion merger with Walgreens in 2015 had left the company weakened with significant debt and reduced scale.

How much debt was eliminated in the first bankruptcy?

The first restructuring eliminated approximately $2 billion in debt and provided $2.5 billion in exit financing, including a $2.25 billion ABL revolving facility and $300 million FILO term loan.

What caused the second bankruptcy filing?

Post-emergence, McKesson and other vendors imposed restrictive trade terms requiring cash in advance for deliveries. Limited inventory led to customer losses, declining sales, and insufficient liquidity—creating a self-reinforcing cycle that led to the May 2025 filing.

Who bought Rite Aid's pharmacy assets?

CVS acquired 625 stores' prescription files across 15 states. Walgreens, Albertsons, Kroger (Fred Meyer), Giant Eagle, and Weis Markets acquired additional locations. More than 1,000 locations' pharmacy assets were transferred to competitors.

When did Rite Aid close its final stores?

Rite Aid closed its final 89 stores on October 3, 2025, ending 63 years of operations. The last locations included stores in Bainbridge Island, Washington and Bend, Oregon.

How was the opioid litigation resolved?

The DOJ settlement required a $7.5 million cash payment and established a $401.8 million allowed unsecured claim. An Opioid Settlement Agreement was integrated into the first confirmed plan.

What happened to the Elixir PBM business?

MedImpact Healthcare Systems acquired Elixir for approximately $576.5 million in February 2024. Rite Aid had originally acquired EnvisionRx (later Elixir) in 2015 for $2 billion.

How many stores did Rite Aid operate at its peak?

Rite Aid operated more than 5,000 stores at its peak following the 2007 Brooks/Eckerd acquisition. After selling 1,932 stores to Walgreens in 2018, approximately 2,100 remained at the first filing.

What professional fees were generated?

Through September 2025, Paul Weiss (debtor counsel) billed over $13.5 million, Alvarez & Marsal exceeded $6.95 million, and Guggenheim Securities reached $4.4 million.

Are there preference actions pending?

Trustee Thomas A. Pitta filed approximately 950 adversary proceedings in October 2025 seeking preference and fraudulent transfer recoveries from vendors including Pepsi-Cola, GNC Holdings, and Hain Celestial.

For comprehensive analysis of pharmacy and retail healthcare bankruptcies, visit the ElevenFlo bankruptcy blog.