Rite Aid Beats Maryland’s Bid to Pause Approved Bankruptcy Plan

Rite Aid Corp. defeated an effort by the state of Maryland to pause the retailer’s multibillion-dollar bankruptcy restructuring plan, securing a path to emerge quickly from Chapter 11.

Maryland has failed to substantiate arguments that it and others will suffer harm if Rite Aid’s reorganization plan moves forward while the state pursues an appeal, Judge Michael B. Kaplan of the US Bankruptcy Court for the District of New Jersey ruled at the conclusion of a hearing Thursday.

Despite a lengthy list of arguments, Maryland failed to put forward any evidence to justify putting at risk a plan supported by several other states and unsecured creditors, Kaplan said.

“For this court, it’s not even a close call,” he said.

Maryland, which has at several points challenged Rite Aid during its 10-month Chapter 11 case, had urged Kaplan to freeze his June approval of the drug store chain’s bankruptcy plan. The state said the debt-slashing proposal was pursued too hastily and it unfairly treated unsecured creditors, particularly those with opioid addiction claims.

Maryland attorney Brian Edmunds said there’s substantial public interest in securing more funds for unsecured creditors and opioid abatement.

Countering Maryland’s claims, Rite Aid attorney Aparna Yenamandra of Kirkland & Ellis LLP said the plan has broad support and is scheduled to commence Friday. At this stage, a pause would all but guarantee the company would have to liquidate instead of moving forward with a thorough plan that “has a real impact on communities,” Yenamandra said.

“We are on the precipice of emerging,” she said. “A stay would not achieve anything here.”

Rite Aid, which filed for bankruptcy in October 2023, won approval of a plan in June that cuts about $2 billion of debt and gives the pharmacy access to about $2.5 billion in Chapter 11 exit financing.

The deal includes a series of settlements resolving federal investigations and more than 1,000 civil lawsuits related to opioid prescriptions. As part of the plan, the company agreed to provide unsecured creditors $20 million in cash and $27.5 million in deferred payments.

The case is In re Rite Aid Corp., Bankr. D.N.J., No. 23-18993, hearing 8/29/24.