Brian Davidoff, chair of the Bankruptcy, Reorganization & Capital Recovery Group, discussed the recent Rite Aid bankruptcy and the future of their stores with TheStreet.

Excerpts:

According to Brian Davidoff, a bankruptcy expert with Greenberg Glusker, retailers in bankruptcy are typically allowed to exit leases, paying the higher of either three years of rent or 15% of the total owed over the lease term.

To determine which retail stores are closed in a bankruptcy, Davidoff says management brings in consultants to help categorize them into one of three buckets: stores it will keep, leases it will reject, and leases it can sell.

It will also need to cut costs, including closing stores. The company has likely done much of the analysis Davidoff suggests, given it recently announced in court filings plans to sell some of its stores and close others.

Davidoff thinks that Rite Aid's bankruptcy filing potentially accelerates the likelihood of a settlement. Davidoff says that unlike other opioid-related bankruptcy filings, such as Purdue Pharma, Rite Aid’s bankruptcy filing doesn’t stretch the bounds of bankruptcy law.

However, Davidoff thinks that risk isn’t likely because Rite Aid has more value as an operating company than a liquidating company.

Resources

• TheStreet