Rite Aid shares plunge on news it is readying chapter 11 bankruptcy filing – WSJ

According to The Wall Street Journal on Friday, Rite Aid (NYSE:) is getting ready to file bankruptcy in the next few weeks in a move that would halt the numerous federal and state lawsuits that the chain is facing over its supposed involvement in the sale of opioids.

Rite Aid shares have lunged almost 50% following the news, trading at $0.73 per share.

Citing people familiar with the matter, the WSJ states that the Chapter 11 filing will cover Philadelphia-based Rite Aid’s debt load of over $3.3 billion and its pending legal allegations that it oversupplied prescription painkillers.

According to the report, the company has not reached a settlement with federal, state government, and private opioid plaintiffs regarding opioid liabilities that may result in a Chapter 11 filing. They are currently considering treating these claims as general unsecured claims.

Rite Aid is currently dealing with over a thousand federal lawsuits, which have been combined into a multidistrict litigation in Ohio. In addition, it faces a substantial number of similar cases that allege it contributed to the opioid epidemic.

The WSJ explained that “unsecured claims rank behind a company’s collateralized debt in bankruptcy and share in the amounts left over after secured claims are paid in full.”

Rite Aid has requested that the court dismiss the lawsuit filed by the department. It refutes the claims that it fulfilled illegal prescriptions for controlled substances. The company’s reported bankruptcy filing would put the lawsuits on hold.