Yahoo Finance Rite Aid Advisers Asked to Cut Their Bills as Cash Squeezed
(Bloomberg) -- Some Rite Aid Corp. creditors have asked advisers representing the bankrupt pharmacy chain to cut their professional fees amid mounting liquidity concerns, according to people with knowledge of the situation.
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The drugstore chain’s fate hangs in the balance even after cinching the terms of a global settlement with key bondholders and other creditor groups in March. Its cadre of advisers include Alvarez & Marsal, Guggenheim Securities and Kirkland & Ellis.
Rite Aid is working to line up financing to support its exit from bankruptcy court, but those efforts have hit roadblocks as some of its junior creditors and asset-based lenders have questioned whether the company will have enough liquidity to support a Chapter 11 emergence, said the people, who asked not to be identified discussing a private matter. The creditors are now asking for advisers to take a haircut to their fees, they said.
A Rite Aid representative declined to comment. Representatives for Alvarez & Marsal and Guggenheim Securities declined to comment, while messages left with Kirkland & Ellis were not returned.
In a sign that Rite Aid is struggling to pay routine bills, gardening supplier Bloem LLC filed court papers on Tuesday demanding $1 million for the thousands of plastic pots it sent the chain between November and January.
Representatives for Bloem didn’t immediately return messages left.
Retailers usually pay their suppliers in order to keep stores well stocked during bankruptcy proceedings. Bondholders and other creditors must wait until the case is over to collect.
Read more: Advisers Make Millions in Bankruptcy as Opioid Victims Get Zero
Rite Aid’s bankruptcy has been a costly endeavor as the company has racked up hundreds of millions of dollars in professional fees, casting a spotlight on its cash struggles. The chain last month put off a key court hearing in order to complete a deal that would cut $2 billion in debt, resolve lawsuits related to opioid prescriptions and end the company’s prolonged stint in bankruptcy.
Since then, Rite Aid has yet to finalize a date to garner court approval for its reorganization plan, which is built on a series of deals the company is now trying to complete.
The deal calls for noteholders to take over the struggling chain and exit bankruptcy protection as a going concern, according to court documents. If the company gets an offer to buy the chain that is worth more than the current deal, it would likely change its plan, Rite Aid has said in court documents.
Rite Aid filed for Chapter 11 protection in October in the US Bankruptcy Court for the District of New Jersey.
Read more: Rite Aid Creditors Blast Bankruptcy Plan’s $20 Million for CEO
(Updates with details in the fifth and sixth paragraphs regarding a vendor request for payment.)
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