Rite Aid Corp.’s main lenders are demanding a proposed $20 million payout to Chief Executive Officer Jeffrey Stein be reduced before they fund the company’s exit from bankruptcy, according to people with knowledge of the situation.
The pay package is one of the few remaining points of contention in negotiations that began last October when the company filed for Chapter 11, the people said. The pharmacy chain in April 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.
The pay dispute comes amid broader concerns among creditors over whether the company will have enough liquidity to support its emergence from bankruptcy, Bloomberg previously reported. Rite Aid has racked up hundreds of millions of dollars in professional expenses since seeking court protection, casting a spotlight on its cash struggles. Lenders have been asking advisers to cut their fees, with some agreeing to do so, the people said. Talks over Stein’s compensation are ongoing, they added.
A representative for Rite Aid declined to comment, while messages left with Stein were not returned.
Stein, who was appointed CEO the day Rite Aid filed for bankruptcy, is also collecting $300,000 in monthly consulting fees, according to court documents. That financial arrangement has also drawn criticism from other committees representing opioid victims.
Rite Aid’s restructuring plan calls for creditors to take over the struggling chain and exit bankruptcy protection as a going concern, according to court documents. The company’s legal team last month sought to reassure creditors that the pharmacy chain will survive Chapter 11, saying the company is still working with banks and a key bondholder group on a rescue deal that has taken longer than expected to finalize.
The creditor group recently agreed to inject $75 million in incremental financing to help build up the chain’s cash reserves and support the restructuring, according to court documents.
Stein received a monthly consulting fee of $100,000 and a success bonus of $1.25 million when he was named chief restructuring officer for bankrupt financial services firm GWG Holdings Inc., according to a SEC filing from 2022.
The company had filed for Chapter 11 protection in April of that year and exited nearly 16 months later.