By Dietrich Knauth
NEW YORK (Reuters) - Pharmacy chain Rite Aid (NYSE:US90274J5618=UBSS) received court approval on Tuesday for a bankruptcy loan that would let the company borrow an additional $200 million, while agreeing to enter mediation with committees representing junior creditors and people who have accused the company of contributing to the U.S. opioid epidemic.
Rite Aid's bankruptcy financing, which the company valued at $3.45 billion due to its refinancing of pre-existing debts, had been opposed by the U.S. government, Rite Aid's creditors committee, and a committee representing plaintiffs suing the company, including those with opioid-related claims.
Those committees have argued that Rite Aid's lenders are the only group that stands to benefit from the company's restructuring, and that victims impacted by the opioid crisis currently stand to get next to nothing out of the bankruptcy. They withdrew their objections after Rite Aid promised to mediate their concerns in January.
Rite Aid, which operates about 2,000 retail pharmacies in 17 U.S. states, filed for bankruptcy protection on Oct. 15, seeking to close underperforming stores, sell its pharmacy benefit company Elixir and resolve over 1,600 lawsuits alleging it fueled the opioid epidemic by filling illegal or suspicious prescriptions.
Rite Aid competitors Walgreens, Walmart (NYSE:WMT) and CVS have agreed to pay $13.8 billion to settle a wave of similar opioid lawsuits outside of bankruptcy.
U.S. Bankruptcy Judge Michael Kaplan at a hearing in Trenton, New Jersey, said he would approve the financing after he had time to review Rite Aid's last-minute revisions to the agreements. Some of those revisions addressed Justice Department (DOJ) concerns about legal terms that could have interfered with government oversight of Elixir, Kaplan said.
The judge said earlier versions of the loan agreements contained "somewhat aggressive provisions" that understandably raised concerns about DOJ's authority to seize cash from Elixir as part of an ongoing investigation into the company's receipt of potential overpayments from the government Medicare health program.
Rite Aid's revised loan documents make clear that the company is not standing in the way of DOJ's law enforcement authority, Kaplan said, except to the extent that it asked DOJ to provide 10 days notice of any regulatory action or property seizure from Elixir.
Kaplan agreed to require DOJ to provide 10 days notice before any action that would impact Rite Aid's bankruptcy, a step that would let the company focus on its restructuring efforts, without limiting government oversight authority.