New Rite Aid, LLC bankruptcy May 7 2025 hearing (first hearing in the second Rite Aid chapter 11 bankruptcy)

Better.

I'll give everybody an opportunity to adjust their videos

Thank you.

As well as I'll take the opportunity to adjust my video. Alright. Obviously, we have close to

Close to.

200, hundred. We're having some feedback. Having some feedback. With speakers on maybe

speakers on maybe

on your laptop.

Let me let me just no. Well, wait wait wait. We'll wrap up for free, sir. We're gonna be okay. Can you all hear me?

Somebody give me a thumbs up.

Give me a thumbs up.

No. Alright. Oops. And alright. Let's continue.

Actually, bear with me. I'll take note. Alright. Let's let's continue. Best laid best laid plans never seem to work.

So, we're going to conduct today's hearing remotely, clearly. We have over 200 participants. I will then so I will ask all of you who wish to be heard to make use of the raise hand function, and we will do our best to identify you and ensure that you can be heard. We have several matters on, obviously. Agenda has been filed.

I in lieu of having everyone, still playing. Unfortunately, folks with camera here. Alright. Bear with me. I don't think that's working.

My apologies, folks. We're coming from the laptop camera, not that camera. Oh, I gotcha. So, what we will still having staff give me a hand here. There we go.

Hey. Oh, I feel so much better. There's little things in life. Alright. In lieu of having everyone enter appearances that could take up up to an hour, I will ask for appearances when I when you are called upon.

And that way we can, move more efficiently and effectively. I know there's quite a few who wish to be heard. It's a complicated case. Obviously, it's a case that the court is familiar with. But let me start and ask for appearances on behalf of, of the debtor.

Good afternoon, your honor. Felice Yudkin, Coleshot, PC, proposed co counsel to to the debtors. I am on the line with a bunch of other people from my firm who will present, and I will have them make their appearances, as as they present later on, your honor. And I'd like to introduce to the court, our co counsel, Alice Eaton from the Paul Weiss Firm, your honor. With respect to those parties from on behalf of the debtors that have are not admitted to practice before this court, we have submitted, ProHawkMIGI applications, and I would request that they, be heard this afternoon, your honor.

That's not a problem. I know our, clerk's office has received, and reviewed numerous ProHawk applications. Many of them, unfortunately, are making use of, the, or not making use of the local form order. We'll we'll take the steps necessary to make sure that when they get entered, there'll be a local form order approving them. But for purposes of today, welcome to New Jersey, at least virtually.

Thank you, your honor. I'm I'm gonna turn the podium over to, to miss Eaton. But just really one quick housekeeping matter. Your honor, just to address the first two items that were on the agenda, which are the complex case designation and joint administration, which are two, customary, noncontroversial applications to the court, and I would request that your honor enter those. I think they're they're pretty self explanatory in terms of the relief that we are seeking.

Alright. Thank you. As I will do, I'm sure, repeatedly today, are there any objections?

This is, this is Jeff Sponder of the United States Trustees office. Your honor, no objection.

Thank you. So we'll mark, both of those granted. Thank you.

Thank you, your honor. And and with that, I'll turn the podium over to our co counsel.

Miss Eaton, good afternoon.

Good afternoon, your honor. My name is Alice Eaton with Paul Weiss, and we're proposed counsel co counsel to the debtors. And we're here on behalf of Rite Aid New Rite Aid LLC, and it's the affiliated debtors.

Right.

We have a short presentation for your honor. But before I get to that, I just wanna note for everyone on the on the Zoom, we all know that Rite Aid plays a critical role in providing essential medication and health care services. And at the company, we are committed to maintaining continuity of care throughout this process. Rite Aid's pharmacies are stocked, and we are filling customer prescriptions without interruption. There have been some rumors about stores closing immediately and going dark, especially in New York.

These rumors are not true. Later in the presentation, we'll talk about five stores, only five stores that will be transferring prescriptions to other pharmacies in the ordinary course. Those prescriptions will continue to be available at the new pharmacy, and we have a chart that will identify those five stores. So we just wanted to clear up some of that some of the press for everybody's benefit. Second, we want to let everybody know that our lenders support us and are funding this process, and we have sufficient liquidity for this.

Process. We therefore will continue to have medications available and we are paying our associates to show up to work to dispense medications and provide patient counseling. And our overarching goal through this process is to protect our customers, our employees and our other stakeholders. We're doing that by providing structure, certainty and transparency through an orderly transfer of our prescription files to other pharmacies that will continue to fill those prescriptions and can offer important opportunities for our pharmacists. And we'll also be selling our non pharmacy office our non pharmacy assets at the same time.

And the relief we're seeking here today is to allow us to begin all of this process. Prior to the hearing, your honor, we engaged in discussions with our key stakeholders, including our lenders who are represented by Choate, with McKesson who is represented by Sibley, certain of our landlords, and I won't name all of their counsel. And nobody has reached out to us with an objection to the relief and the timeline of what we're seeking today. So before I go on to the presentation, I also wanna introduce some of my other, members of the Paul Weiss team. I'm here today with my colleagues, many of whom you may know, including Andy Rosenberg, Billy Clareman, Greg Laufer, Chris Hopkins, Sean Mitchell, Alison Benidon, Claudia Tobler, and Nick Krzyzpov.

This is among the team that you will hear from today. So why don't we get into unless your honor is questions, we can go to our our presentation.

No. I appreciate it. I appreciate your opening comments. I always said, one at least one of the benefits of having the remote hearings, is the transparency, is the ability to get, information out accurately, amongst media outlets, social media. And I think it's important, to especially for a case such as this.

Thank you. But you can continue.

Thank thank you, your honor. So why don't we go to page four of our presentation? And I'll give you a situation overview of sorts, your honor.

Let's see. There we go.

There we are.

Okay. Terrific.

So since emerging from chapter 11 in August of twenty twenty four, Rite Aid's businesses have continued to experience a number of challenges. Unfortunately, these challenges have only intensified as a result of the rapidly evolving healthcare retail landscapes in which we operate. And several of the business challenges that the company faced, we really didn't anticipate at the time it emerged from Chapter 11. So to address these various issues over the past few months, we've been evaluating in coordination with our lenders several options to identify the best path forward. And after considering all of our alternatives, we determined that the only viable path forward for our customers, employees, creditors, and all of our stakeholders is to once again commence Chapter 11 proceedings and transition our pharmacy assets to our competitors.

So we will use this case to pursue a value maximizing sale process for our assets, while ensuring our customers continue to receive the medications and care they need. And as I'll speak to later in this presentation, Your Honor, we're in active discussions with multiple potential purchasers of our assets, and we intend to use these cases to conclude those discussions and consummate the sales of our assets. So turn the page. Your Honor, our pharmacy business has remained strong and delivered exceptional care prior to, during, and after emerging from the prior bankruptcy case. Our pharmacists at Rite Aid are the heart of our business.

Our pharmacists have gone above and beyond to provide care to customers for over sixty years and continue to show up every day with the same dedication throughout and after the company's prior cases. They consistently delivered high standards of personalized care, trusted expertise, and essential services to support the everyday health and wellness needs of our communities. As a result, Rite Aid pharmacists are deeply rooted in their communities and have developed close personal relationships with many of the customers. Customers see our pharmacies as a key component of their healthcare journey, not just a place to pick up medications. Unfortunately, our non pharmacy business, or otherwise known as our front end retail business, the high margin part of any retail business significantly underperformed due to a variety of adverse circumstances, and it couldn't be turned around following our emergence from bankruptcy.

Let's turn the page. Now from the last case, your honor, you might recall our Elixir business, our Yeah. Pharmacy benefits manager business. And following, we had we had sold this business. We sold this business in the last case.

And following that sale transaction, there's only one Elixir entity remaining in the the debtor's corporate structure. It's an entity called Elixir Insurance Company or EIC, and that's the entity which historically offered drug benefits to eligible beneficiaries under Medicare part d. As was the case in our prior chapter 11, EIC is not a debtor in these cases. And to provide you with an update, because you may hear about Elixir and EIC from other parties, EIC is currently undergoing a wind down under Ohio state law, and the debtors have been in contact with the applicable regulatory authorities, including the Department of Ohio Department of Insurance. We've also been in contact with the Department of Justice regarding Likser's wind down.

Your honor, you may recall from the earlier case from our 2023 bankruptcy, EIC and Rite Aid entered into a settlement agreement with the Department of Justice and the Department of Health and Human Services with respect to claims asserted against EIC and other Rite Aid subsidiaries under the False Claims Act. And under that settlement, the parties, Rite Aid and EIC, agreed jointly to pay The United States One Hundred And One Million Dollars in settlement of those claims. To date, we've made $56,000,000 of these payments, and we are in contact with the Department of Justice regarding the outstanding $45,000,000 amount. Let's go to the next page. Your honor, some of these parties will be familiar to you on behalf of the debtors who have advising Paul Weiss as counsel and Cole Schatz, Alvarez and Marsal as financial adviser, Guggenheim Securities as investment banker, A and G as our realty advisor, and Kroll as our claims and noticing agent.

And we also note that the DIP agents, Bank of America, Wells Fargo, and Capital One are advised by Choate, BRG, and Greenberg Traorek. Your honor, you you've seen this slide before. This is a a history of our company from its founding in 1962, our many acquisitions, our first chapter eleven case in 2023, and our emergence in 2024. Let's go to the next page. Your Honor, following the 2023 bankruptcy, this is now our footprint.

You'll recall that we divested our Midwest business. And so we have our Northeast, our Mid Atlantic business, our Pacific Northwest and California businesses. We have twelve seventy seven retail stores across these 15 states, and we have three distribution centers. And currently, we serve 8,000,000 customers across these 15 states, and we dispense 2,000,000 prescriptions every week. Let's go to the next page.

So your honor, this is this is a description of the two components of our business, the retail pharmacy and what we call the front end business. They're symbiotic because our dedicated pharmacists deliver essential medications and care to our pharmacy customers, and that includes, as many of you know, immunizations and general health consultations. And our front end retail business offers a variety of non prescription products, including health and beauty aids, personal care items, convenience products. Now historically, the prescription drug business drives a large volume of foot traffic to our stores, which drives revenue from these higher margin front end sales if there is adequate stock adequate inventory in stock for those products. This is our post August 2024 capital structure, which will also be familiar to many involved.

And we have $2,100,000,000 approximately outstanding under an ABL facility, a FILO liquidity facility, 1.5 lien notes and 3L notes. So going back to why we're here today and what happened, Your Honor. When the company emerged from bankruptcy in August 2024, we all made very rational and justifiable business assumptions that included expecting vendors to return to pre filing trade terms and releasing deposits, which would have generated sufficient liquidity to be invested in the front end business. We also expected to quickly secure incremental liquidity facilities at the time of emergence, which would further provide necessary liquidity for purchasing inventory and improving in stock rates. However, these assumptions did not materialize and Rite Aid's reality quickly became very different than what we all expected at Emergent.

It was the combination of adverse macroeconomic factors, including lower consuming spending, resulting from inflation and higher interest rates, changing customer preferences, market uncertainty, and all of that significantly reduced revenue compared to projections. Many vendors maintained restricted payment terms and refused to return deposits, and we were unable to secure incremental liquidity facilities on the anticipated timeline. So as a result of these factors, the company did not have adequate cash to execute on a business model, which required a well stocked front end shelf. Now this all happened unfortunately at the worst possible time immediately ahead of the critical seasonal fourth quarter period when pharmacies typically have their highest sales volume. And as a result, the impact of the negative these negative factors on our revenue is exacerbated.

Go to the next. Your Honor, this just graphically shows, the liquidity challenges that the company faced during 2024 and early twenty twenty five. With these ongoing competitive and in a very competitive landscape in the retail pharmacy space, Simply had declining levels because we weren't able to restock our shelves and that problem persisted, we had declining inventory levels, which then reduced to led to a reduced borrowing base under our ABL facility. As a result of that, we had reduced liquidity because we had less borrowing base to borrow against and could not purchase additional inventory. So all of this all of these effects compounded in real time, causing the company to fall further behind on its goal of replenishing inventory to the level required to achieve revenue and cash flow projections.

Let's go to the next page. So the company did not sit on its hands and sought to address all of these challenges through a variety of strategic initiatives. We implemented operational cost saving measures, including reductions in force among discretionary departments, managing labor hours, cost saving policies, consolidating distribution centers, managing supply chain, closely managing working capital and labor hours and implementing lease modifications. We also engaged in footprint rationalization efforts remained, and those efforts that started in during the bankruptcy of 2023 continued and continued to this day. And it resulted in the ordinary force closure of 29 retail locations and definitive purchase agreements for the prescription files of another 63 stores.

Now Your Honor, certain we listed the five stores I raised at the top of our hearing. Certain of these stores are scheduled to close this week, and we'll be seeking relief in our store closing motion with respect to these stores. These are ordinary course transactions, but out of an abundance of caution, our store closing motion includes a notation in the order that any of the closings that occur before you enter that store closing order will be covered by that order. And again, these stores as you can see are in Peterborough, New Hampshire Portland, Oregon 1 store in Brooklyn One in Vernon, Pennsylvania and another in Cheshire, Connecticut. And the last of our last of our initiatives, we amended our pre petition ABL credit agreement in mid January in an effort to unlock additional liquidity.

And this liquidity was in the form was provided in the form of these certain escrow funds, that were it's called the CMSR, escrow that was created in the last bankruptcy case and also provided for step down of reductions in the minimum ABL availability covenant. So as I've said before, our primary goal here in this chapter 11 is to achieve value maximizing sales of our stores and our prescription to other pharmacy companies. And we're here today because a court supervised chapter 11 process is essential to do several very important things. First and foremost, continue to fill our prescriptions and eventually transfer those prescriptions in an orderly manner. Second is to preserve jobs for our employees and preserve as many as possible through the opportunity for those employees to be interviewed and employed by the purchasers of our assets.

And lastly, maximizing value by moving forward with an organized structured business now on an expedited basis, first focusing on the sale of our pharmacy assets, whether that includes the scripts themselves, leases or any of other assets that those purchasers which seek to purchase, and then a second a second process for the remaining assets that will begin at the May and run into June. Let's go to the next slide. Just to give you some sense of our strategic sales process, which is being run by Guggenheim, we call it the strategic sales process, we call it the Guggenheim process, but basically this is a process that began back in March. And there's been ongoing the company has done ongoing evaluation of the sales process over time, but the Guggenheim was engaged in March. And through this process, the company sought to divest or monetize any of its any of its assets.

The mandate was quite broad. And the sale process that we're looking for you to approve today is really the conclusion of this robust month long process that occurred marketing process that occurred pre petition that was carried out by the debtors with the assistance of their banker, Guggenheim. So to be clear, beginning in early March, Guggenheim contacted 38 parties, signed 21 NDAs, gave, data room or VDR access to 20 parties, and there are 10 parties as of the petition date, 10 parties still working. Since the petition date, we've received outreach from additional parties who have signed NDAs, were granted access, and now we believe we have 15 plus parties still working and working towards the sale and the bid deadlines. So here are our milestones.

This is just with respect to the sale process. There are separate milestones for the dip that will that key off of these dates. And as you can see, your honor, we have our pharmacy asset sale process, which as I said, can include leases. It can include other assets. But primarily, it is focused anyone who wants to buy these pharmacy assets, they have to bid in connection with the pharmacy deadline.

And then you have the remaining assets that are left over after we get through our prescription sales. The bid deadline is early in the morning on May 13. The auction, if we need one, will begin on Wednesday, May 14. Objections, I'm sorry, we'll file apologies, we will file our proposed sale order on May 16. The objection deadline will be the nineteenth and the sale hearing on May 21.

And as you can see from the right hand column, the remaining asset sale process, indications of interest will be required by May 30 and that sale process goes through June, with the sale hearing on June 25. So your honor, even though we've been moving quickly, we took the time pre petition to make sure that we could coordinate with all of our various regulators. And as you can see from this list, there are many to alert them to our Chapter 11 filing and our expectation that we would be selling our assets, selling the prescriptions, and transferring them to, to purchasers on a relatively expedited timeline. And as you can see here, most important at the bottom, in addition to the Department of Justice, it's the State Attorney General's, the Drug Enforcement Administration, the Pennsylvania Governor's Office, the FTC, and the many the boards of pharmacy the state boards of pharmacy in the 15 states in which we operate. So there are a few slides here about our proposed DIP financing, and Mr.

Hopkins will cover the DIP motion. But just so you see it, we're asking the court's authority to enter into a dip facility that will give us $2,240,000,000 dollars of incremental liquidity on top of the existing $1,700,000,000 that will, that will convert from pre petition loans to post petition loans as we as cash is swept down and we pay down the lenders under their existing loans. The pricing is here. Mr. Hopkins will go through it.

It's a twelve month loan. Let's go to the next page. Fees are paid in kind, and the security is and priority is, you know, it's a self priming dip and it it primes all of the the existing ABL and will be senior. Let's go to the next page. The dip as Chris as mister Hopkins will walk through has milestones that are that are keyed off of our, sale process timeline.

And your honor, as we as you can see, if you go back, we have a time a milestone of June 9 for entry of a final order, and so we will be asking for a final, a hearing on the approval of the dip on a final basis, in early June. We've included the budget, and this is a slide we might refer to later as questions arise. This was filed on a docket and is available to all the parties. So, your honor, since we filed the cases, we've received a lot of questions from landlords and, you know, parties that wanna simply understand how the sale process affects their rights, because we're proposing to sell all of our assets that includes leases. And there are several different processes pursuant to which leases can be can be sold.

And so here, we have our, our global process. We're calling it the Guggenheim m and a process that is governed by the bidding procedures. Then we have, sale of closing locations or alternatively our store closing motion, which is, nearly identical to what was entered in the last case. And this really covers the ordinary course closures that arise, you know, the one, two, three, six, you know, the it it can be larger in number, but basically, the very ordinary course prescription sale and store store sales that, the company has engaged in, you know, since its last bankruptcy. Then we have a lease and fee owned property sale procedure.

And then we also have, a motion rejecting Ciznunc ProTank, as well as an unexpired executory contract and nonresidential lease rejection procedures motion. Let's turn to the next page because this will then make a lot more sense. It's like a spillover effect, your honor. We have all these processes and ultimately, at the end of the day, it all funnels over to the lease and executory contract rejection procedures. If your lease isn't assumed or rejected pursuant to our strategic Guggenheim process, if it's not rejected pursuant to our closing location sale, or our lease and auction procedures, we think that will cover 99.9 percent of all of our lease matters.

If there's anything left after that, we will then file or rely on the first day pleading, the lease and executory contract reduction procedures. So first, you focus on the Guggenheim process, then the closing and location process, then we go to the lease and fee property auction procedures, and then you go to really what would be one off, one off assumption or rejection if they weren't covered by all three sale processes before. So our first day agenda, just to put put this up for your honor, for ease of reference, we're gonna we're gonna kick off with our bidding procedures motion and then go to our debt financing motion and our store closing procedures, and real property sale procedures motion. Those those motions will be covered by Paul Weiss. Then we will hand over the podium to Cole Schatz, and they will cover the remaining motions, cash management, wages, etcetera.

Your honor, if we don't finish today, we will be asking for bridge orders, but my hope is that we will be able to finish the hearing this afternoon, so orders can be entered today. So that is our presentation, your Honor. And, we believe, as I said earlier, that this is a necessary step to

protect the interests of all of our stakeholders. And we at Rite

Aid are committed to maximizing sale process. So, your Honor, if you have any unless you have any questions, we can go into the next the the first motion on the agenda, the motion for entry of an order approving our bid procedures.

Alright. No. I think it makes sense to, take these, matters, consistent with the agenda. I will hear from parties who have concerns, or wish to raise take issue, or object.

Why don't we

take down the slides?

Yep. Thank you.

There we go. Yeah. Alright. So we have, number three on the agenda, number 18 on the, court's calendar, The motion for approving the auction and the bidding procedures. I have read through the declaration of mister Rivkin and the overall declaration of, the Chief Transformational Officer.

Excuse me? I I thank you. Regarding, overall, all of the first day matters, and as they pertain to this motion. Let me hear the motion, then I'll see, address I see one hand raised already. Two hands.

Your honor, before before we do that, I I I forgot it. I apologize. Before we get to the motions, we'd like to move the declarations of mister Liebman, our chief transformation officer, into evidence as well as the declaration of Adam Rifkin of Guggenheim Partners and Elise Freya, our expert on consumer privacy issues.

Alright. Let me hear if there are any objections, or any parties through counsel wish to take take the opportunity to cross examine, any of the witnesses with respect to their declarations. Understanding that, obviously, everything's been filed on shortened time, and, on a for the most part, interim basis. Miss Nelson, I see your hand raised. I don't know.

Yes. Yes, your honor. The I wanted to address the revised CPO declaration. We believe there are some significant gaps in that declaration that I can address in my argument again, related to the bid procedures order, but just wanted to lodge an objection noting that there are significant omissions and it is by no means a complete CPO, report under the bankruptcy code.

Alright. I'll certainly hear from you further on it. With respect to the declarations of do any counsel wish the opportunity to cross examine either any of the declarance, that have been identified? Alright. The court will accept the declarations, in lieu of direct testimony, and and into evidence.

We'll mark, the declaration of Mark Liebman as d one, the declaration of, mister Rifkin as d two, and, the declaration of Elise Briska, if I'm pronouncing it somewhat correctly. She's certainly appeared in front of me before, as d three. And then I'll I'll hear concerns again and objections, in the course of of of the presentations. Alright. Council wanna continue with the bidding procedures motion?

Yes, your honor. Your honor, we have already spent some time outlining our sale milestones in our process. But just to be clear, we have our pharmacy asset process for May and our remaining asset sale process that will begin with indications of interest at the May and running through June. Parties who are party to NDA as of the petition date, They are if they want to purchase pharmacy assets, which can also include if they want, they can put purchase leases as well. But if they wanna purchase pharmacy assets, they are required to submit an indication of interest.

Pardon me, they're required to submit a bid and an APA by the bid deadline on May 13. When we get to the conclusion of our auction process, we will post a notice of what is remaining to be sold. And the remaining assets will go into the remaining asset sale process, which will continue forward with the indication of interest in May with the sale hearing at the June. There are because of the sensitivity of our pharmacy assets, that's obviously where we want to seek expedited relief under rule 6,003 for our remaining assets, which include can include IP, our ice cream business and other and other assets that we hold. They are not nearly as as exigent in terms of a speedy transition, and so those can occur on a more ordinary time timeline.

However, I'll note that the Guggenheim mandate allowed included the sale of all of these assets and so the marketing process for assets has been ongoing for some time. And so what I'd like to do is I'd like to hand over the podium to my partner, Sean Mitchell, who will cover the remainder of the motion. And so I'll just quickly move my materials and allow Sean to take my seat.

All right. Thank you.

Good afternoon. Your honor.

Good afternoon.

Sean Mitchell from Paul Weiss, proposed counsel for the debtors.

Alright. Let me please proceed.

Thank you, your honor. So, your honor, I I believe, we sent a revised form of order to your honor. We've been, we've been hard at work for with with the number of parties who've reached out given, getting feedback giving feedback on the, form of order. I would like to describe a few of the a few of the most salient changes for your honor, and then I will propose to, hear from those parties, and then we can hear from parties that have, any further opposition to the order. Go.

Proceed. So your your honor, first, we connected with, mister Sponder and miss Mispinski from the, office of the United States trustee. And there, we, made two we, made two salient changes. The first of which is we adopted a final and interim dichotomy. So what we are asking your honor today is we are asking your honor today for a final order in respect of the pharmacy assets.

And we're asking your honor for an interim order in respect of the, in respect of the remaining assets, with a final hearing on May 21.

Alright.

That that's the that that's the first piece.

Okay.

Second piece is on the consumer privacy ombudsman. Your your honor, where we landed is that the debtors are seeking an order that they will relieve their privacy policies allow, for the transfer of the of the protected data. Therefore, the appointment of a consumer privacy ombudsman is not necessary, but that party's rights to raise the issue in the future are are reserved.

Alright. Thank you.

So that that's the first batch of changes.

Alright. Continue.

The second change, stems from a meeting with mister Eamon O'Hagan from The United States Attorney's Office For The District Of New Jersey. And there, what the debtors have, proposed to do, and this is in the revised form of order, is in connection with the sale process, the debtors proposed to file the form APA, that that will be posted to the bidder's data room this Friday. And then in connection with the winning bid, when it's filed, they will file a a red line to to that order to assist parties review of of any changes. Oh, Excuse me.

Okay. Thank you. Continue, please.

And then finally, we have a few clarification. Second last. A few clarifications, stemming from discussions with parties representing landlords. So the clarification for the record is in respect of the assumption and assignment provisions for, unexpired leases and executory contracts to be assumed and assigned to a bidder. And the clarification for the record, which which is also in the, revised form of order, is that counterparties to the to an executor contract or uninspired leases to be assumed and assigned to a buyer will have fourteen days, to clear up any any confusion about that vis a vis the objection deadlines for the sale itself.

Alright. Are those incorporated in the separate motions dealing with assumptions and rejection

of the,

of of the of the leases and the secretary agreements? Or is that part, all is that only limited as part of the sale motion?

I believe it's part it's part of the the sale motion.

Just part of the sale motion. Sale.

That sale, the bidding procedures order that we're asking your honor to enter today.

Alright.

And then finally, we were, in contact with the FTC today, and the FTC asked us to confirm something on the record, which which I shall do right now.

Alright.

So for the record, any sale under these procedures, will comply with the debtor's privacy policies and state law, including with respect, to to the opt out feature. And no customer data will be sold, no customer data will be sold, who who has who has opted out.

Alright. We have that on the record. And is that, your initial presentation?

That's initial presentation, your honor. I would propose to to hear from parties, who have who have feedback, and then we'll take it from there.

Thank you. I see a variety of hands. So let me first turn to the office of the US trustee, mister Sponder.

Thank you, your honor. Jeff Sponder from the office of the United States trustee. Your honor, we we have no objection to the actual order, that incorporates the United States trustees' proposed revisions and as has been, stated, will be final as to the pharmacy assets, but interim as the rate remaining assets. Although the issue as to the consumer privacy ombudsman is reserved, your honor, even if the sales transactions are consistent with the privacy policies, we think a consumer privacy ombudsman ombudsman should be appointed in these cases. Your honor, these cases are much different than the first cases where the goal of those cases was mainly to reorganize.

These cases appear to be liquidation cases, and the debtors, with their 8,000,000 customers as we were just advised, contain immense amounts of individuals PII and PHI. The US trustee acknowledges that the debtors have again hired a consultant concerning the privacy issues just like in the prior cases. But in these cases, being what appear to, again, be liquidating cases, an independent third party should be appointed to look at these privacy issues, not the individual selected by the debtors. Just wanted to set that, for your honor for the record. We know it's reserved, but, we think that this case is in a much different posture.

And and, your honor, even though the privacy policies may be in in line with allowing the sale, still someone independent should look at these. Thank you, your honor.

Alright. Thank you, mister Sponder. Let me turn to others who wish to be heard. Let me start. Miss Nelson, Kimberly Nelson, let me have your appearance.

Thank you, your honor. I realized I neglected to introduce myself properly last time.

That's alright.

Kimberly Nelson. I'm bankruptcy counsel for the Federal Trade Commission. And, well, I appreciate, the prior statement regarding our interest. It doesn't fully resolve everything we're here to talk about. Your honor might recall that we are, entered into an order with the debtors in its prior case, and one of the provisions of the orders relates to misrepresentations.

And the debtors are prohibited from misrepresenting the extent to which they maintain privacy of covered information. Covered information under our order includes things like PII and PHI. One of our primary concerns, and this is with the caveat that we've had less than 24 to review all of this information

Of course.

Regarding these sales and to clarify the prior representation made on the record, we were not contacted pre pre petitioned. We were contacted yesterday, regarding this filing. So one of the concerns we we see right off the bat is the the definition of pharmacy assets and what is prescription data or PHI or information that is allowed to be, transmitted under HIPAA, it is not unclear whether that includes PII. So, you know, you could be a pharmacy customer of Rite Aid, but also not have a prescription with with Rite Aid and have they still have lots of PII on you because you're a customer of the store. So, you know, what's what's not clear is what exactly is being sold.

What what customer data is being sold? Is it PII? Is it PHI? Is it both? And we think we think that's a really important distinction to draw in this context because pharmacy data has a particular value, customer data has a particular value, and we just don't know whether it's jumbled together or separate or what is happening here.

So for that reason, we think the the finding in paragraph 25 of the order is premature, because there's just not enough evidence to understand what privacy policies govern the sale of certain assets here, certain data assets that is, and whether or not everything is actually being complied with. Which brings me to my second point, which is the revised CPO report. Some of the problems that we noticed right off the bat was there's, no analysis of whether the custom made customer data collected for consumers who opted out might be sold or how it's being treated or how it's been filtered out. And absent that clarification, again, we just there's no assurance other than what was just stated on the record today that they don't intend to sell the opt out customer data. Secondly, there's no mention of our order.

And and under three sixty three b one b two, the the ombudsman should be reviewing not only the privacy policy, but other applicable law. Our order is other applicable law. And and I think it's a a glaring oversight for the any CPO not to be looking at our order in conjunction with this sale. And and finally, there's no analysis in the CPO the revised CPO report that was filed about state specific provisions and how they affect the the sale of assets. It's mentioned in a footnote, but it's not analyzed.

So for example, the the current privacy policy, the one that was amended a week less than a week before the the case was filed says, in a state specific provision, California is in particular that only certain specific identified as personal PII type assets can be sold and no others can be sold in calif of California customers. And there's just no analysis of whether or how the sale complies with that specific provision of of the privacy policy. And again, if if that is sold, if that California customer data is sold in violation of the privacy policy, that's a misrepresentation under our order, which is then likely an order violation. So you can see how these cut these issues compound when it's it's analyzed in conjunction with our order. So again, these are these are just a few of the things that we saw in the last twenty four hours, and and we'll keep working on it and obviously keep discussing things with the debtors.

But given the extremely accelerated timeline that we're under here, this is this is a lot of really important information to be missing from a sale involving customer data, whether it's PII or PHI.

Alright. Thank you, miss Dawson. I'm sure I'll turn at some point to debtors council to address these issues, or lay out a format for addressing the issues. Let me, hear from others. Miss Hellman, let me have your appearance.

Good afternoon, your honor. Leslie Hellman for Ballard Spahr on behalf of a number of, the debtors' landlords. Current current total number right now is north of 50 locations, including Federal Realty, Fairview, Patentsby, Crabco, Sterling, Realty Income, Spirit, and Weiss Markets. Your honor, I'm also local counsel to another landlord counsel, Ivan Gold, who is I see has his hand raised as well and has and, would request permission for him to speak at the appropriate time.

That's fine.

Your honor, we did work with mister Mitchell and mister SS on the, our comments with respect to the proposed bidding procedures and the expedited timeline. As you can imagine, our biggest concern was, having to respond to a sale of a lease on, no less than one business day's notice. And these even though because the bid procedures didn't provide for separate assumption and assignment procedures for the leases themselves to the extent that a bidder was, seeking a transfer of the lease as part of a larger sale. We did receive that clarification that any transfer or sale of a lease as part of this larger sale, whether it's the pharmacy asset sale or the remaining asset sales, will be on fourteen days notice upon, notice of the successful bidder of those assets. So we will have a full fourteen days prior in time to any approval of the sale and the transfer of those assets to the buyer If the, if the objection can be resolved, then the transfer can occur earlier.

If the trans if the objection cannot be resolved, I'm sure that we will then seek a hearing, voirter, honor in which to, have a determination on an objection. But with with that clarification that there will be actually actual notice and adequate time to review a buyer and object if necessary, that would resolve our issues. There were other minor changes to the order at the request of the landlords, so we do appreciate that that is working with us expeditiously to resolve those issues.

Alright. Thank you, miss Hellman. I appreciate, identifying those issues. I'll I'll turn to mister Gold now and and hear from him as well.

Thank you, and good afternoon, your honor.

Good to see you.

Ivan Gold for a number of the debtors' landlords current head count in the twenties. I join in miss Heilman's comments. I'd like to thank mister Mitchell and his colleagues for working with us on on short notice. To respond to one of your honors inquiries, what we focused on initially was harmonizing. As miss Eaton outlined, there are multiple potential paths for leases to be assumed and assigned in this case through the variety of the transactions that are being pursued by these states.

So one of our first goals was to harmonize the procedures to make sure they lined up. And that's where you see this fourteen day procedure now is, to a certain degree, uniform among the procedures. So the landlords will have that fourteen day period, notwithstanding the the short fuse, on the sale transaction, which is necessary in some cases. That that fourteen day period will still exist. Hopefully, many of these buyers we will recognize.

We we have a safety valve, procedure if we do have to come back to your honor. Obviously, as is common in every lease centric chapter 11, if the dispute simply relates to cure, we have mechanisms for that so the transaction can go forward. So again, shout out. Thank you to the the debtor team for that. I just wanted to add one more clarification, your honor.

This motion sought in the motion what appeared to be a blanket advance $60,046,006 waiver with respect to the transactions going forward. The order itself, however, and that can be found in the proposed order that accompanied the motion at paragraph 36, made it clear that or at least provides that $60,046,000 sick labor applies to the procedures itself. And we have no objection to it applying to the procedures itself because the second we conclude today, the debtors gonna be off and running to the extent they're not already moving. But each of the various transactions that are contemplated by the bidding procedures order will themselves present different circumstances. And we are not here today to argue whether a 06/6006 waiver or a shortening of time would be appropriate for one of the multitude of potential transactions.

I just wanna clarify on the record that we're talking about 06/1946 thousand '6 as to the bidding procedures order. The debtor is free. You know, clear. We're not pampering the debtor. The debtor is absolutely free to request that in connection with subsequent transaction.

And as we say, we'll cross those bridges when we come to them. But just wanted to get that clarification on the record, your honor. And, again, thank the debtor team for, helping us narrow and resolve so many issues. Great.

Thank you. And, yes. So just for clarification, and debtor's counsel can confirm a later point. The waivers with respect to rule six thousand and four and six thousand and six, relate to this pending motion. The bidding procedure is not to the subsequent approval of the sale or any specific sale or assumption or assignments.

Thank you. Mister Fleisher.

Good afternoon, your honor. Thank you. Scott Fleisher, Barclay Damon, counsel to a number of the debtors landlords as well. We had the same concern about the potential lack of notice for leases there. So glad to get that fourteen day period confirmed.

And like other counsel, we're also trying to harmonize the other proposed orders here. So just for your honor's clarification, in the lease assumption assignment rejection procedures motion, that's now just turning into a lease rejection procedures motion to eliminate one of the avenues that could cause this confusion about where where these lies. So again, the fourteen days notice will be here. And then there were some emails going on when we get to it, the lease sale and feel and property procedures motion about making sure landlords had appropriate notice there as well. So just highlighting that issue for when we get there.

Alright. Thank you. So for the most part, then you just want to lay the groundwork for concerns on the notice, as you're going forward with respect to the individual assumption assignment transactions that are contemplated. Thank you.

Yes, sir. Thank you.

Thank you, mister Fletcher. Alright. I'm looking. I don't see other hands. Up.

As soon as I say that, you know what happens. Miss Van Eck.

Good afternoon, your honor.

Sorry for the late hint. Melissa Van Eck on behalf of the Commonwealth of Pennsylvania. I'm here, your honor, to just highlight, we did not have an opportunity to reach out to debtors counsel, but we would like the sell motion to include reference to our injunctive terms that were negotiated as part of the settlement in the first case. And as part of that agreement, the injunctive terms, were to were to be complied with by any purchaser of Rite Aid, and we just wanna make sure that that, is included or at least referenced in the proposed order so that third parties know that they do have to comply, with those terms. And again, my apologies.

We did not have the opportunity to reach out to debtor's counsel prior to the hearing.

Understood. Not not not an issue. Thank you. Thank you, miss Vanek. Alright.

I still see a hand, mister Fleischer. I assume that was just, residual. Alright. Mister Mitchell, do you want to address any of the concerns that have been raised?

I do. Thank you, Your Honor.

So, starting with, I believe, miss miss Nelson? Yes. Miss Nelson's concerns. So the first point I make is this is not a consumer, privacy ombudsman report. This is, this is a declaration in support of bidding procedures.

And what we're asking your honor to to, enter today, the relief that we're seeking, is the relief to set up the framework to get the best value for the assets, your honor. And then in this framework, we're asking for certain deadlines. We're asking for certain hearings. And, of course, we will be back before your honor for the ultimate authority to make us to make the sale under section three sixty three. And for that, we will file a a proposed, sale order with your honor.

But today, we are not, actually seeking authority for the sale. And for that, this is not a consumer product, consumer privacy and bug. I think kind of related point there is that what I heard is, is a potential sale issue. It is it's unclear whether the sale will do this. It is unclear whether the sale will do that.

Both the reason it is unclear whether the sale will do x, y, or z is that there is no sale before your honor yet. So I think that's an issue better handled when there is a sale presented to presented to your honor. Third point I'd make is that the finding that I that miss Nelson mentioned, in connection with our addressing The US Trustees of, comments. Now that finding reads that the debtors are cert that the sale transact proposed sale transactions are consistent with their privacy policies and, therefore, a consumer privacy on buzz but is not required. So there there is actually not even a finding anymore that the debtors did not make these certain disclosures on their on their on their policies.

It's just a finding as to the debtor's assertion that policy say this or do that. And then, of course I'm

not being let me just clarify. I'm not being asked to rule today on the appointment of mama's or

not. Correct?

Right.

Right.

And I have not heard anyone make a make a motion on short notice for an appointment.

Okay.

Okay.

And anything else?

And then then the last point is, to address miss miss miss Van Eck,

I

believe. I I think that too is a is a is an issue for the for the sale order, And we're we're more than happy to work with, we'll work with the government on this.

Alright. Thank you. Anyone else wish to be heard? At some point, I do wanna hear from the lenders. Probably, it's more appropriate when we, address the dip finance motion.

At at this juncture, what's before the court is the approval on a recognizably truncated, schedule for, bidding procedures and the, process and parameters of the sale of both the pharmacy assets and the non pharmacy assets. The court appreciates the, the need for an expedited process, and recognizes that this is not even though it's a retail case in some respects, there's more to it. It's not simply a retail case involving the sale of books or shoes or fast food or car washes. We're dealing with we're addressing, health care needs. When you hear the numbers of, over,

you

know, 8,000,000 individuals getting their, pharmaceutical needs or their medicinal needs addressed, the the millions of transactions. And the court, is going to support a process that ensures that it's a free flowing process. That, those who will be acquiring these assets as well as, those who are, going to help facilitate the process can do so in, an efficient, orderly, and quick process to ensure, continuity for the benefit of, customers, continuity for the benefit of of the pharmacist involved, and continuity, for the for the benefit, of the, employees. It all works together. The stores need to continue their operations, and, and and to work in assisting the, an orderly transfer, and will do so in a quick process, which is why I'm going to, approve this expedited, time frame.

The objections and I I wanna thank both counsel for those who've raised objections and concerns, as well as debtors counsel for having addressed, and done undertaken so much of the work prior to this hearing, obviously. And, I think it becomes obvious that this has not been a sixty day marketing period or a thirty day marketing period. We're it's really been a two year marketing period. And, I think, the professionals have done well in addressing the immediate needs, on an interim basis. I'm going to approve, the bidding procedures, subject obviously to a reservation of all rights, to take issue with the concerns that have been raised.

And I agree, it seemed to be more, sale objections than process objections. They can be raised at the, appropriate hearing, whether it be the May 21 hearing or the June 25 scheduled hearing for non pharmacy assets. We'll address them then if they if they remain unresolved. With all these orders, I I would like to take the opportunity to review the redlined and marked up versions. You let me know here from debtors counsel.

I would like to enter these orders in an orderly fashion, possibly tomorrow morning, you know, by, like, 10AM. But I'll it'll give me the opportunity tonight to review, the changes to the orders. Does that pose a problem?

I I I think it does, your honor. Okay. I I'm I'm told that especially with respect to the dip, we're gonna need seeking an order today.

Oh, okay. I was talking about the sale order.

Talk about the sale order.

Do you need that entered today, the bidding procedures order?

Your your honor, I I I do think it's important, to have the order entered today so we can, have the comfort that the parties can move forward. But

then we'll I'm time frame.

Do I have a final version of what's been marked up,

Yes. Okay.

Oh, you were asking me. Well,

I just want to ensure that I have I don't wanna confuse the docket, start entering orders when there's been language changes. I could take the time after the hearing as soon when we get done in time to have them entered, but where do we stand as far as getting the language?

Your honor, Felice Jadigan from Coal Shot. To the extent that revised red line orders are not in your inbox, we will ensure that immediately following the hearing that you have the most updated versions of the order.

Alright. Well, if that's the case, I'll make sure we get into that. Miss Nelson?

Yes. Thank you, your honor. Kimberly Nelson. I'd like a copy of these red lines since we have not been given a courtesy copy.

I think that's fair. Absolutely.

We'll we'll get that to you. We'll we'll we'll we will we'll get that to

you, obviously,

right away. Anything sent down to to the court, make sure they they get circulated as appropriate. Alright. But, for the record, the court will, grant the motion as as requested, and we'll review the order, once we, finish this afternoon. I think that takes us to the dip.

Good afternoon, your honor. Okay.

Can you

hear me okay?

Yes. I can. Good afternoon.

For the record, Christopher Hopkins of Paul Weis, Rick and Morton and Garrison as proposed co counsels to the debtors. It's good to be back before your honor and reiterate all my colleagues' comments thanking the court, the US trustee, and everybody else who's been working with us since the petition date to try to get these issues resolved. So the next item on the agenda is the dip motion, which was filed at docket number 41. We filed the first day declaration from Mr. Liebman, which has already been entered into evidence that was filed at docket number 24.

And then just for completeness, your Honor, the DIP budget, which is technically Exhibit C to the motion, but was filed later in the day, it was filed at docket number 67.

All right. Thank you.

So Your Honor, we're here today seeking approval of a $1,940,000,000 DIP facility that will be provided by Bank of America and the other lenders under our pre petition ABL facility together with related mechanics for the consensual use of cash collateral all on the terms set forth in the interim order and the DIP documents. The structure of the DIP is similar to the exit ABL that Your Honor approved in the last go round and that it has a revolving facility that's being sized at $1,700,000,000 and then there's a Filo facility that's at $240,000,000 This is a twelve month facility. And with these arrangements, pursuant to the terms of the DIP docs and approved budget, we will the DIP facility is going to provide the essential funding necessary to ensure these cases are a success. It took extensive negotiations with the DIP lenders to reach consensus on the terms of the DIP facility. And we really believe for all the reasons set forth in Mr.

Lehman's declaration that this financing is really the is not only the best, but it's really the only viable financing that was available to the debtors to fund these cases. And without the use of consent sorry, your Honor, without the consensual use of cash collateral and the incremental liquidity that's being made available under the DIP facility, it's really essential to provide confidence to our customers, our employees, our vendors and all of our other stakeholders who we need to make sure that this process is as successful as possible. So with that context, turning to the terms of the DIP itself, so it's a twelve month facility. As I said, it's a $1,700,000,000 revolver and a $240,000,000 FILO. Under the terms of the DIP facility, the DIP lenders have agreed to modify certain covenants and other provisions of the existing exit ABL to that unlocks incremental liquidity for the debtors in addition to the cash collateral that we're allowed to access during the case.

And that is really essential to ensure that, as Your Honor knows, things happen in Chapter 11 and and that incremental liquidity provides a cushion to ensure that all of our operations continue uninterrupted, all of the obligations that come up, the critical freight of the case gets paid. And so it's really essential to the overall process. Similar to the dip in the last case, the way the dip works is it provides for an interim roll up of the pre petition ABL on a creeping basis. So as Your Honor may remember, we were in we've been in Cash Dominion since we emerged from bankruptcy. And so every day all of our cash is swept down to the banks.

So the way that interim roll up will function, every day we get operating receipts, at the end we make disbursements throughout the day pursuant to the agreed budget. At the end of the day our cash balance is swept by the banks and then following day there's a new advance. And so over time those the sweeps pay down the old ABL, the advances are issued under the new revolver and that is the creeping roll up that we're asking for approval of today on an interim basis. There's no other roll up being approved today upon entry of a final order. The the DIP documents do provide for a full roll up of the pre petition ABL.

And I would note, your honor, that and this goes to, you know, some of the hard fought negotiations we had getting into the case. The interim roll up does actually save the estates approximately $450,000 in interest expense because the rate the interest rates on the post petition dip facility are actually inside of the default rates under the old facility. So there's less interest expense being incurred by the estates as the dip rolls up over the interim period. There is a fee package for the dip lenders. They get an upfront fee that's paid in kind equal to 1% of the revolver, 1.5% of the FILO.

There is an exit fee that's payable at maturity. But importantly, there are crediting mechanics where any portion of the dip that is permanently repaid prior to six months, there's no exit fee charged on those amounts and any amount that's prepaid prior to nine months fifty percent discount to the exit fee, but the aggregate exit fee is 10%. Your honor may have read in the DIP papers that there was also a backstop fee of 10%, but that has been rendered irrelevant because 100% of the pre petition lenders are participating in the facility and that backstop fee was only intended to cover participating DIP lenders who overfunded their pre petition commitments. Okay. Otherwise, it's a pretty customary set of covenants, including the standard budget approval process and related variance testing on receipts and disbursements.

We are agreeing to a milestone schedule that effectively tracks to the dates that Your Honor just approved in connection with the bidding procedures. For our other secured creditors, as your honor recalls, we have two series of secured notes and a portion of the obligations owed to McKesson under the supply agreement are also subject to liens. There will be replacement liens and super priority claims to the extent of any post petition diminution in value. The pre petition ABL is getting, fees and default interest until the roll up is completed. And then the rights of the other pre petition secured parties outside of the ABL to seek additional adequate protection are preserved.

Otherwise, just to hit some other points, there's a customary carve out. There are no statutory waivers contemplated for today. So five zero six and five fifty two are up for approval at the final hearing. And otherwise, customary challenge period, we're asking for sixty days after entry of the interim order or with respect to the committee sixty days after the committee is appointed, which as Mr. Sponder said, we hope is sometime next week.

So with that, your honor, I mean, that's the high level presentation. Obviously, if your honor has any questions about the facility, I'm happy to answer them. Otherwise, I know we've gotten some comments from the US Trustee and a few other parties that we've been trying to incorporate into a revised form of order that will submit to Chambers. One change I would highlight that was requested by the U. S.

Trustee, which I think the banks are prepared to agree to, is that the filed version of the order contemplated liens on avoidance actions and their proceeds upon entry of the interim order. The banks have agreed to defer that to entry of the final.

When are you looking for the final? What's your where are we fitting that final in among these milestones?

So your honor, I I I believe if we're gonna have our second day hearing on June 6, that that falls within the dip milestone for entry of the the final order. The milestone is thirty five days after, the petition date.

Okay. So, June 6 is a Friday. That would I would peg it at 11:30, in the morning. But, let me hear from others first before we solidify that. Before I turn to any anyone else with a raised hand, mister Hopkins, do you have anything else?

Unless you have questions for me, your honor, I do not have anything else.

Not at this juncture. I read through the the motion and the supporting documents. Mister Ventolo, good afternoon.

Good afternoon, your honor. I hope you can hear me okay.

I can. Thank you.

And it's good to see you, your honor. Thank you for the opportunity to be heard today. So I just wanted to briefly echo some of the comments that Mr. Hopkins made. This was an extraordinarily complex process to get where we are today.

We worked cooperatively, but at arm's length in a fiercely negotiated dip process with the debtor and its advisors and we're very pleased we got here. I would note, again echoing Mr. Hopkins that all 21 banks in the pre petition facility have agreed to participate in the dip subject to the court's approval of course, and that is a really noteworthy accomplishment under these circumstances, your honor. So you noted earlier you want to hear from the lenders. I'm here.

I should have noted at the beginning. I'm representing Bank of America as the pre petition, ABL agent and proposed dip agent. Happy to answer any questions at all that the court may have of course. I did want to confirm one point that Mr. Hopkins made with a clarification.

If we are able to reach a consensual form of interim order today and it's entered as planned, The lenders have agreed that the lien on avoidance actions and the proceeds of avoidance actions would be deferred to the final hearing. But with the exception, your Honor, of any claims under Section five forty nine of the code, we don't expect that there to be any unauthorized post petition transfers. But if there are, I think it's very customary for the dip liens to attach to that type of avoidance action. And I'm nearly certain we had a comparable provision in the interim dip order in the first case, your honor. So, again, here for any questions you may have, but, again, pleased to be here today.

Thank you.

Alright. Thank you. At this point, I prefer to hear from others if I have, I'll come back to you, mister Bento. Thank you for your time.

Thank you.

Mister Sponder?

Thank you, your honor. Jeff Sponder from the office of the United States trustee. Your honor, we provided we requested revisions, this morning. We realized that an interim order, will be entered, but we'd like to reserve our rights with respect to the revisions that we raised. There were about eight or nine, specific revisions, one of which has already been decided, and we appreciate that.

With respect to the avoidance actions, your honor, I would note that I I understand, from banks counsel the the five 40 nine issue, but I I did hear that there is gonna be a possible issue with McKesson as to whether or not the what however much money, I think it was 400,000,000 or something, is gonna be is a pre petition, payment or a post petition payment. So it could be an unlawful post petition payment. So I know of one right there, but that's something that we can discuss. I I wasn't sure if that was in the, the the the order of the first case. But with three but your honor, with respect to the roll ups, ups, just so that you're aware, paragraph 12 does include language allowing the court to fashion an appropriate remedy upon a successful challenge to the roll ups.

So that, gives, me some, you know, some comfort in in allowing the interim roll up. Again, there's gonna be another roll up at the final, and, hopefully, we'll have committees in to deal with that. One one issue main issue that I have before this order can get entered even if we don't go through, my other issues Is there there's reference to paragraph numbers, and I think the reference is is wrong. There are a lot of references to paragraph 11, which should be paragraph 12, which is actually the challenge, paragraph. So those those need to be changed for purposes of the interim order.

So we

need to

we need to clean up. Yes.

So clean up. I mean, and and my other issues, I mean, I've already sent over to to to council. It's an interim order. I would hope that we can, you know, quickly resolve those issues. I will note for your honor that page 108 provides, that the DIP lenders are not responsible for funding in the carve out any success transaction, or similar type of fees, and I haven't seen that before.

Just wondering though how the debtors will be able to pay that if those fees will exist. Again, we haven't seen any retention applications, I would suspect, from Guggenheim or, you you know, the investment banker. I think they're they're the investment banker. So I'm not sure how that will work. But, yeah, I can go through those those issues, briefly, your honor.

I do know one one of which is I think that, they're they're seeking the challenge period sixty days for the for for parties and interest from the interim order. We typically ask and get fifty sixty days from the final order. So that was one thing that we, we included in there. We also included some other, NITS as well. But I thank you, your honor.

Alright. Thank you. I'll hear from debtors counsel on, what they're prepared to address. Mister Toomey?

Good afternoon, judge Kaplan. Can you hear me okay?

I can. Good afternoon.

Great. Just for the record, your honor, Dennis Toomey with Sidley Austin on behalf of McKesson Corporation. Your honor, I just wanted to make a few points and will only take a couple of minutes here. Just by way of quick background and as I'm sure your honor recalls, McKesson is the supplier of about 90% of the the dollar volume of the debtors prescription drugs. And McKesson's deliveries to Rite Aid can total, you know, anywhere from twenty, thirty, forty million dollars or more products per day.

Since we emerge or since Rite Aid emerged from bankruptcy last year, the relation has been governed by a new supply agreement that we negotiated coming out of that case. And the new agreement contains some protections for McKesson that the prior agreement didn't have. For example, caps on trade credit, and an ability for McKesson to adjust those caps. And it also provided for McKesson to receive a second lien as you've heard earlier, for its outstanding trade debt. Those were among the the provisions.

Turning to where we are today, McKesson is owed at least a hundred and $30,000,000 of trade debt as of the petition date. That's not an agreed upon number which I'll I'll touch on again momentarily. All of that amount, your honor, again falls within the confines of section five zero three b nine since it all stems from product that was delivered in the days leading up to the filing. And it's also secured by that second lien that I I mentioned a minute ago. As miss Eaton noted, McKesson has continued to supply Rite Aid since Monday's filing.

Your honor, big picture, we do not believe McKesson is obligated to extend post petition credit or take on any post petition credit risk from the debtors. Our understanding from our discussion with debtors counsel, however, over the last couple of days is that this won't be an issue, because the debtors intend to pay McKesson effectively one day in advance during the bankruptcy cases. And my understanding is that the dip budget will permit the debtors to make such payments. Just a couple of final notes your honor. We did have a few We had some comments on the dip order.

I think some of them have been accepted. I think if you are still open and if not resolved, we will seek to resolve them between now and the final hearing, or otherwise. Obviously, we will file something in advance of the final hearing to the extent we need to. We're just now getting in the loop on the McKesson side on the debtors game plan for for sales and store closings. Obviously, all of that impacts the supply relationship.

So we'll need to better understand how all of it will work and and the debtors have committed to help get the McKesson.

Is there anything exciting in the last

finally, just a point I alluded to a minute ago. We have have a disagreement with the debtors involved in the characterization of the payment that was made on Monday. If it doesn't get resolved, we do expect to be back in front of your honor in the relatively near term. The debtors have agreed, as I understand it, that if McKesson is correct in its view of this issue, that the debtors will have the ability to pay under the dip and otherwise, and will pay McKesson the corresponding amount in dispute. Again, if McKesson, is is is correct in that dispute.

So I just wanted to put that on your honor's radar in case we have to come back before you. In the meantime, McKesson will reserve all its rights with respect to today's motions, for the final hearing. That's all I have, your honor. Thank you.

Alright. Thank you, counsel. And if needed, you all know where to find me. Me. So Thank you.

Alright. Mister McCullough?

Good afternoon, your honor. I'm appearing on behalf of Green Dot Corporation and Green Dot Bank. I was only engaged this morning, so I have not yet submitted a ProHawk VICI application or associated with New Jersey Council, but intend to do so promptly, if

I may be heard. Absolutely. Go ahead.

Thank you, your honor. Green Dot Corporation and Green Dot Bank have a relationship with Rite Aid, whereby Rite Aid sells prepaid debit cards and other financial products to its customers. And then those customers may have the opportunity to come back to Rite Aid and to reload the cards. And what that means is that every day, Rite Aid receives possession of funds from those customers, which under the terms of the agreement, it's then required to hold and trust and then to disperse promptly to Green Dot. In the meantime, Green Dot, of course, is required to, supply services and advance credit to the customers.

Those disbursements have, I understand, been interrupted as a result of the bankruptcy filing. We've received indications that they will be resumed, but I wanna make two points in connection with this motion and in connection with the cash management motion. First, my understanding is the dip notion would not cause liens to attach to any property that doesn't actually belong to the debtor as we believe these funds would not. If, of course, the dip lenders or the debtor in possession have a different view, we'd want to get that out on the table. And then second, with respect to the disbursements, it's important that those disbursements do resume promptly so that we can continue to provide the service from a supply product to Rite Aid and avoid any suspension in services and perhaps a fight in front of the court.

So I wanted to make those two points. I don't think it prevents, the entry of the interim orders that have been proposed today, but I wanted to alert you to this issue, let you know that we'll be working with the debtors and other counsel in an effort to make sure that they're appropriately addressed in the final hearing and, of course, to come to you earlier than that if for some reason, disbursements don't promptly resume or there is some question about the safety and sanctity of the funds that the debtors are holding.

Alright. So we're carving out noting that for the inclusion in the final order when we get there assuming we get there. Thank you, your honor. Thank you. Mister Gold, I see your hand.

Thank you again, your honor. Just very briefly, first, another thank you to the debtor and lender teams as interim debt orders go. This one was pretty good, in terms of anticipating landlord issues and incorporated the experience of, of the first case, and we only have minor comments. Just in terms of a preview of coming attractions, however, as has been noted, the budget was just was separately filed. And, we do anticipate stub rent will be an issue in this case that will have to be addressed.

Obviously, tying that with other comments throughout the hearing that will await the, appointment of a committee and the retention of committee counsel. But, that's just an issue we will, be working with the the debtors and the lenders and the UCC going forward, in advance of the, the final hearing, which you've tentatively identified for early June. Thank you, honor.

Alright. Thank you. Miss Ringer, another familiar face.

Good afternoon, your honor.

Good afternoon.

Rachel Ringer from Kramer Levin. I'm actually appearing, in this case on behalf of an ad hoc group of secured note holders. I I wanted to just appear quickly for the record. We have no objection to the entry of the interim order. We support its entry.

I did just wanna note for the record that there are a couple of items that we're discussing with the dip lenders and the debtors. We expect that we will, be able to get those resolved before the final hearing, but I just wanted to to note that for the record and and indicate that we're supportive of the entry of

the interim debt order today.

Alright. Thank you, miss Wenger.

Thank you,

Your Honor.

Alright. Mister Hopkins, let me turn back to you. I know mister Sponder raised some specific issues.

Yes. Yes, your honor. So let let me kinda take him a bit out of order. Sure. So on on Guggenheim's fees, there's actually language in the bidding procedures order that addresses that.

As a general matter, they'll be paid out of the proceeds of the sales and the language around that will be embodied in the sale orders. So that's why they're not the success fees aren't in the carve out because the idea is that they're paid directly as the proceeds come in under the applicable sale transactions. Just briefly on the challenge period, Your Honor, so just a couple of things. So I think, one, all of the liens and claims here have been approved pursuant to orders of this court. So while, yes, everyone should get an opportunity to take a look at those things, I think this is not a case where it's going to be a complex analysis on the validity of those liens and claims.

The cases do need

to move

quickly. Sixty days is not a particularly short period of time, particularly given that it's really only been a six or seven month period that's going to be relevant to a challenge anyway. And I think it's given that the committee is going to have sixty days, I think it is reasonable. And it's also it could be part to the extent the committee does have an issue with it, we can obviously address it together with the DIP lenders between now and entry of the final order. But with that, otherwise and yes, we will address Mr.

Saunders cleanup. And Obviously, the order was changing significantly as we in the lead up to the filing. So, that was our miss. On the comments from McKesson's counsel, I'll just say that, I mean, we generally agree. We hope we can get things resolved and but we obviously we know where to find your honor.

And then finally, I always take great pride in any kind of compliment from mister Gold. So I appreciate that. Unless your honor has any other questions for me, I mean, I think our plan is to to circulate an updated order. Obviously, we gotta get the banks to sign off on that. We'll send it to mister Sponder, so he can review how we've incorporated his changes.

But unless there were other questions for me, your honor, coming out of the comments from the other parties, I think that's all we have unless mister Ventola would like to add anything here.

I'll turn to mister Ventola in a second. My only concern is, I guess, the downside of starting an afternoon hearing is we get crushed for time, and you all tend to work much later hours than our court staff. So we need to coordinate. If you need an order entered today, we need to, at least, focus on trying to get it down to us as soon as possible, coordinate with my chambers. I'll make sure that

the clerk's office knows it's coming. But, I I believe it's being updated in real time, your honor. So hopefully, this can all be done very quickly. And we apologize for imposing on the court, but we we do need to turn our bank accounts back on in the morning and start getting money out to keep operations running smoothly.

Understood. Just coordinate with my keep my chambers in which you all do in the loop. Mr. Ventola?

Thank you, your honor. I did want to address the challenge period point as well. In light of how quickly this case is moving, we do think having a trigger off the interim order and or the appointment of the committee having the sixty days go from them is important here. I will certainly tell the court we are prepared to share perfection evidence documentation to any committee immediately upon their appointment. And I do understand that the US Trustee is moving quickly to get a committee formed, which we really appreciate.

But we will not in any way be an obstacle to providing whatever needs to be reviewed for people to get comfortable with any challenge issues. And we, of course, are quite confident there are no challenge issues given what you've already heard and already know about the lending facilities. And then just I also wanted to address the point that Mr. McCullough raised with regard to Green Dot Bank. We don't believe that debtors are granting liens on property that is not theirs, nor nor could they.

So we are not seeking any liens, against property, not of the estate.

And

again, if there's any other questions you have, your honor, please let me know. Thank you.

Alright. Thank you. Mister Sponder?

Thank you, your honor. Jeff Sponder from the office of the United States trustee. Your honor, as you know, it's it is normal, to have the sixty days from the final order for parties and interest and then sixty days from appointment of the committee, with respect to the committee. My thought here is if your honor wants to do something, different is to make both, sixty days from the appointment of the committee. We'll try and get that in as quick as possible.

I also realized that the second hearing isn't gonna be until June 6, a month away. So I I I understand that'd be a lot of time, but my thought was maybe as a compromise to do sixty days for parties in interest and the committee from the appointment of the committee. Thank you, your honor.

Alright. Thank you, missus Fonder. With respect to the with with respect to the challenge period, yes. It is normal, and the court supports normally having, that challenge period run from the final order. I think it's a good thing we don't normally have chapter 20 twos.

It's not something that we strive for. And but when we have it, the fact of the matter is much of what's been, put in place as far as liens was a direct result of what went on in the prior case a year and a half ago or if that long, or eight months ago. So, it it's a narrow window to to examine. It's a smaller, path to have to, proceed upon by any committee. What I'm going to do is order, include in the order and permit the sixty day challenge period to run from the interim.

If during and if there's a problem with the appoint and there's delays with the appointment of a committee and the committee has an issue and requires more time, they can get in front of me. I will make sure that happens. And I'll hear why they need more time, and if it's reasonable, I'll address it. But I, given the circumstances of this case, I think it is appropriate to move forward quickly. And I think it's appropriate to start the clock, with the appointment of the interim, with with the execution or the entry of the interim order.

Most of the other issues that have been raised, will be addressed as part of the final hearing. We'll fix that for June 6 at 11:30. And I will go ahead and I will, approve, the finance on an interim basis as discussed and described. Alright. I believe that takes us to the fifth item on the agenda, and I'll hear from debtor's counsel.

Thank you, your honor. I'll cede the podium to my colleague, Nick Kristoff.

Great. Thank you.

Your honor, Nicholas Kristolov, all of ICE, post counsel to the debtors. The next item on the agenda is docket number 25, which is the closing procedures motion. Your honor, we filed the form of order at, docket number 60, and we will have some changes. We've been in discussions with, a number of the stakeholders and landlords, trade counterparties, and the US Trustee. The revised order will reflect comments from landlords regarding side letters, other changes largely conforming to the orders entered in the 2023 cases.

Language reflective of discussions with the US Trustee regarding the debtor's consumer privacy policies as well as pigment of consulting fees. And then, you know, and then, some certain trade vendor language that, also would be included. One thing to flag, we've been in discussions with counsel to the DIP agent and the consultants and are tailoring additional functionality around the consulting the consultant's fees. While we are not yet finalized there, the parties are in close coordination and hope to come to a resolution shortly after the hearing, and we intend to submit a proposed consensual interim order along with red lines, once that it's been finalized. Your honor, the the relief requested under the motion is substantially similar to the relief that was, granted in twenty twenty three cases.

And, you know, accordingly, we would request that your, your honor, grant this, order, subject to, obviously, the caveat on the, the consultant's PPEs.

Alright. Thank you. Mister Sponder, any issues you wish to raise?

Thank you, your honor. Jeff Sponder from the office of the United States trustee. The United States trustee has no objection to the entry of the interim order. As, you know, we understand our requested revisions have been or will be incorporated in the, proposed interim order. Thank you, your honor.

Alright. And, I'm going to keep moving forward with the calendar unless I see raised hands. And since I see no raised hands, then I'm going to grant, the motion on interim basis, final hearing, same day same time, 06/06/1130.

Thank you, your honor.

Thank you.

I will hand the podium over to my colleague, for listening.

That chair is getting a workout.

Good afternoon, your honor. Claudia Tobler, proposed counsel for the debtors. I'm here to seek entry of the leaks and fee owned property auction and sale motion, which is docket number 22. Like my colleague who just presented the location sale procedures motion, we did get numerous, comments from various stakeholders, including the US trustees and various landlords. I will, say that we have incorporated most of those comments into a revised form of order.

They address issues such as, timing of objections, notice, etcetera. These are procedural motions that are intended to establish a streamlined auction and sale process for leases and fee on process, properties as they become available from the other sale procedures that have been previously described. And a lot of the comments go around providing a little bit more structure and transparency around those procedures, especially as it relates to notice. So I will have, a few statements that I'll make on the record that I think will supplement what we've agreed to in connection with the revised orders. In particular, and one thing that has been mentioned earlier in terms of making these various procedures relating to specialty leases more synchronized, I can state on the record, again, this is as it relates to docket number 22, that we will agree to extend the objection deadline fourteen days from the date on which the notice of the auction and hearing are filed on the docket.

That's the general objection deadline to the sale of the lease. Once the lease has been selected for sale after an auction, there will be a specific objection deadline three days prior to the auction. It's based on the selected buyers, adequate assurance, and similar other types of objection bases that couldn't have been raised previously. Again, we've, spoken to various counsel to the landlords. We have also incorporated comments from the US trustee into the revised, procedures.

I'm not sure as I sit here right now that we've resolved everything, and and I do wanna make sure to give council opportunities to to raise anything that we haven't addressed. To the extent we haven't, I think it's just a matter of, wordsmithing, and I'm optimistic that we'll be able to get your final revised form of order addressing all of these points before the close of, business today. And with that, your honor, unless you have any questions in terms of what the motion overall, provides, which is basically a process very similar to what you would see ordinarily for contracts except it allows to bundle leases and fee owned properties as again they fall out of the other processes. We would ask for entry and approval of the order, on an interim basis with a final order to be held, entered and hearing held, on June 6.

Alright. Thank you. Let me go to the raised hands. Mister Fleischer? Yes,

sir. Again, good good afternoon. Scott Fleischer, Barclay Damon on behalf of a number of the debtors landlords. We do appreciate the, the fourteen day clarification because that was, one of the issues that was still pending when the when the hearing was beginning. So so happy to hear that part.

It it sounds still like there's going to be potentially two objections that landlords have to make. It's that initial one with fourteen days notice. But then if it's subject to an auction, then there's some other sort of procedure that's going along with it. And I understand they say it would be three days prior to a sale hearing, but it's sort of unclear, right, how many days there could be in between when an auction would end and and then. So I think we need some further clarification that there would be due process on that point.

And really, that would be the portion where the landlords really need the most notice. Right? Because that's when the proposed S and E is going to be made clear, when adequate assurance information needs to be provided. So I just wanted to get some more on that one.

Alright. Miss thank you. Miss Heilman?

Thank you, your honor. For the record, again, Leslie Heilman, Ballard Spahr on behalf of a number of the debtors' landlords as noted on the record earlier in this hearing. Your honor, mister Fleischer has, pointed out the the the crux of the remaining issue on this. We have worked with the debtors and they have incorporated a number of comments that we raised prior to preparing to resale procedures order, and we don't take any issue, with the debtors seeking approval of procedures to run an auction process and solicit bids for the sale of their leases. And in my understanding of the timeline is that for the for those auction procedures, they're proposing that they file an auction notice that will identify when the auction will be held and when objections to the auction procedures will need to be raised, which I understand that is.

So it's a it's my understanding, it's a twenty one day notice process in which parties will have fourteen days to object to the notice and auction procedures, so the notice of the auction itself. What is missing from these procedures is when there is a auction held and then there's a notice of successful bidder, the debt the procedures are silent as to the time frame in which to notice the successful bidder and to raise specific objections to the successful bidder and get to a hearing. So if I understand miss Todler correctly, they're going to file a notice, and we will have fourteen days in which to file general objections to any sale of the lease and auction process. Then the deletes and auction process. Then the auction will be held, and then there will be a further time in which we'll have three days prior to a hearing, to object to the successful bidder.

Based on my calculations, if we have an if it's a twenty one day process and the auction is held at or around the time of the fourteen day objection deadline, that means the auction only leaves seven days before the sale hearing. So if we have a successful bid notice filed on the fourteenth day, that only gives us less than seven days prior or four days in which to object to the actual successful bidder. And this is a little different than the sale processes that were approved by your honor in the first case as well even with connection with the expedited bidding procedures that are being approved for the sale of the pharmacy assets and the renaming assets. What these procedures set up is for a sale of of leases either on an individual basis or lots of leases or designation rights to third party assignments who are not going to be continuing to operate pharmacies and who are so there's a lot more that goes into, and we need the time from the time the successful bidder is identified in which to have adequate and reasonable notice. This process has been, approved recently as recent and similar processes in Big Lots, Joann's, and Party City where there has been numerous rounds of leases sold.

And in each of those, there was fourteen days or twenty one days notice of those actual sales in which we went from an auction or a notice of a successful bidder to final approval bias at a sale hearing. And we needed each I I can assure you that your honor, we needed every day of that notice because we're looking at essentially a mini potentially a mini contested trial with respect to each and every lease and each and every assignee. And there was over 240 leases sold in Big Lots. There was over I'm sorry. It was 300 and some in Big Lots, over 240 leases in Party City, and those weren't just to a single buyer.

They were to at any given time, we were we had 10 leases in play in which we're being sold to 10 different buyers. So the the point in time from the time the successful bidder is identified to a potential hearing, your honor, is the time frame that we are most concerned about, and the procedures are silent and actually just leave to the discretion of the debtor to establish a timeline, some reasonable notice that they believe is reasonable for the net. So that is our issue, your honor. I think that in order to harmonize the different procedures, we would we would, at a minimum, require at least fourteen days notice from the time the successful bidder is identified in which to object. And in the other processes that have been held is a hearing was only scheduled if necessary if the if an order a consensual order couldn't be reached, and that was on, I think, seven or ten days notice, of a hearing date.

So we don't necessarily need to set a hearing on the lease asset sale procedures today, but we do need at least adequate notice of who the buyer is, what the cure is, what their adequate assurance is, and then a reasonable period of time in which to review that and raise objections if necessary.

Alright. Thank you. Thank you for clarifying. Mister Gold, and then I'll get to missus Bonder.

Thank you again, your honor. Ivan Gold for a number of the debtors landlords. I would just like to join in as Hyman's comments and note to the court. The the simplest way to look at how these procedures are different is, as miss Hyman said, these are harder assignments. The first round is pharmacy buyers.

The use under shopping center leases is going to be the same. These are the processes where a pharmacy buyer did not take the lease. So, again, depending on the lease terms, we could see a multitude of potential alternate uses being proposed for, literally hundreds of leases from this debtor and compressed in the time period to deal with the broader list where a significant number of the debtors' leases are subject to the heightened shopping center standards. A quick runway of single digit days and not even business days, but calendar days. You know, under under the three days the debtors have thrown out there, it literally could be the old Friday to Monday.

And the issues that would be confronted in these lease sales are more complex and more varied than would be presented in the first round where we got 14. So I I think that's the lens you should look at this. We we understand the need to liquidate, you know, these assets for the benefit of multiple stakeholders in this case. But when you consider, you know, arranging for witnesses, arranging for negotiations to avoid taking time of your honor, when your, you know, practice teaches us if a deadline is three to five days away, particularly with an intervening weekend, you just file an objection because you got to, as opposed to taking time to, you know, potentially work out, a consensual structure. So I I just wanna echo miss Heilman's comments and point out to your honor, these are the hard ones.

Thank you. Thank you.

Alright. Thank you. Thank you. Before I address those issues, mister Sponder?

Thank you, your honor. Jeff Sponder from the office of United States Trustee. Your honor, no objection to the entry of the interim order as the US trustee requested revisions have been or will be incorporated in the interim order. Thank you, your honor.

Alright.

So,

it sounds like we're close, but there needs to be some tweaking, or some more work done. I think miss Tollgway even acknowledged it. I have a calendar tomorrow as well. To the extent the parties can agree on language for an interim order and you can get it down to us today, great. We'll enter it.

If you can tweak it tomorrow morning, great. If you need or if you want the court with respect to the interim order to come down and decide, if there's an issue that you can't resolve, it has to be included in the interim order, then I'm gonna leave open 11:30 tomorrow morning for continue after my ordinary Thursday morning calendar. And I can address this or if if we have another motions, just language issues or you need the court to make a call. For the most part, what I'm hearing is nobody's really jumping up and down against, the order the interim order. It's just concerns on, some of the timing as part of the process.

If the parties couldn't agree, great. If not, I'll make the call tomorrow if, if it can't wait till a final hearing. Alright? So, we'll mark it granted, order to be submitted, but you'll let my chambers know, with this or any other motion coming down the pike this afternoon, if if you need the court's attention additionally tomorrow. Hopefully, it'll get resolved.

So before we get to the seventh matter on the agenda, my staff here needs to take a five minute break. So we'll just, put put you all on hold. Don't go anywhere. We'll just turn off the visit the video and the audio. Thank you.

Be back in five.

Thank you, Aaron.

Thanks. Okay. And we are back. Let everybody else come back as well. Looking for debtor's counsel who wants to there we go.

Who's taking the chair?

Your honor, Felice Judkin from Coal Shot.

If

we're ready to move on to the next agenda item, Mark Zuckerman from Coal Shot is going to handle the next item on the agenda, which is number seven on the board's agenda.

We are ready, mister Zuckerman.

Thank you.

Oh, he has to can't hear you. There you go.

Can you hear me now, your honor?

Yes. We can. Thank you. Good afternoon.

Good afternoon. For the record, Mark Zuckerman from Cole Schatz, for the debtors. Your honor, I'll be presenting the cash management motion and the wages motion, which are numbers seven and eight on the agenda.

Alright.

Hopefully, we can, I think we'll be able to go through these two pretty quickly? Starting with, cash management, which was filed as docket number 23. Your honor, the debtors are seeking authority to continue using their cash management system in the ordinary course. I'll just say that the cash management system is substantially the same as when the debtors filed in 2023, except simplified because they sold the Elixir business. So there are now only four non debtor accounts.

They're all with Elixir Insurance Company, and there's the minimus activity, and the debtors don't expect to have any cash transactions with those accounts. We've provided, the US trustees office with the draft of the motion before it was filed. We incorporated their comments to the interim order. So unless there are any other comments, your honor, we'd ask that the, interim relief be granted and the proposed interim order be entered.

Mister Sponder.

Good afternoon, your honor. Jeff Sponder from the office of the United States trustee. As I'm gonna say to most of these, motions and orders, your honor, we have no objection to the entry of the interim order. As we understand, the US trustee requested revisions have been or will be incorporated in the interim order. Thank you.

Alright. I'll just check-in with you with each one. Mister Thank you,

your honor.

Mister Vandola.

Thank you, your honor. John Vandola, on behalf of Bank of America, we don't have any comments in the order, and we we certainly support its entry. I would just ask, your honor, at the risk of imposing on you and your staff, this is another order that would be good to get entered today, in conjunction with the dip just to make sure there's no interruptions or the like in the debtors banking services. So, otherwise, we we, support the motion to keep order as is. Thank you, everyone.

Our goal is to get all get get them all entered today. Great. Thank you. What I'm going to ask is debtors counsel, do it collectively. I don't want it to come in, on a rolling basis because then we just never know when there's another order coming in.

Send them all to us. Send it down to the our chambers email address. Our staff can get can can with just a note that, the they've all been agreed to or or they're the original without any modifications, and, we'll get them ordered. We'll get them entered. Number eight, mister Zuckerman.

Thank you, judge. Next up is the wages motion that was filed as, docket number 14. First, I'd just like to thank the court for entering the emergency, what I'll refer to as the emergency payroll order. The company needed that order entered, to ensure that, payroll checks that it had issued would be honored, during this lag period between the petition date and entry of an interim order. So thank you for that.

Your honor, goes without saying the debtor's employees are the lifeblood of the company. The the importance of the employees to this process can't be overstated. We're seeking authority to continue and pay associate compensation and benefits in the ordinary course during the interim period. We're not seeking authority to pay any insiders and we're not seeking authority to pay any amounts in excess of the statutory priority caps during the interim period. Again, we provided the US Trustee's office with a draft of the motion before it was filed and incorporated their comments before it was filed.

So unless there are any other comments or questions, we would ask that the court grant the interim relief and enter the interim wages order. Mister Sponder?

Thank you, your honor. Jeff Sponder from the office of the United States Trustee. No objection to the entry of this interim order, as, we understand that the US trustees requested revisions have been or will be incorporated into the interim order. Thank you, your honor.

Alright. Motion is granted. Thank you.

Thank you, judge. With that, I am going to turn the virtual podium over to my colleague, miss Hartlett, who will be taking the next, items on the

agenda. Thank you.

Alright. Thank you.

Good afternoon, your honor. For the record, Martha Hartliff of coal shops, proposed co counsel to the debtors. Thank you for accommodating our schedule this afternoon, and this is my first time appearing with Cyster, so it's a pleasure to be

here. Welcome.

Thank you. First on my list of items before you today is the debtors motion authorizing the debtors to file consolidated list of their 50 largest unsecured creditors and their creditor matrixes, and to direct certain personally identifiable information related to the individuals. This is found at agenda item number nine and docket number five. Importantly, we worked with the office of the United States trustee in advance of filing, and I believe have agreed upon the language in the proposed order that was attached to the motion that was filed. And unless your honor has any further questions, we would respectfully request entry of the interim proposed order.

Seems mister Sponder?

Thank you, your honor. Jeff Sponder from the office of the United States trustee. As you suspect, your honor, no objection to the entry of the interim order as the US trustee requested revisions have been or will be incorporated into the interim order. Thank you, your honor.

So just have that as a screensaver. Alright. Granted.

Thank you. Next, I turn to agenda item number 10, the debtors request for an extension, the deadline to file their schedules and statements of financial affairs. This is found at docket number seven. In this order that debtors request a twenty eight day extension to file their statements and schedules, and this would push the deadline to June 20. We have agreed upon the state with the office of United States trustee and accordingly, respectfully request entry of the proposed order.

Any change to the time frame? Mister Sponder?

Thank you, your honor. Jeff Sponder from the office of the United States trustee. Yes. The time frame was changed to to June 20 and agreed upon. Just to alert the, the court, the United States Trustee may conduct, a 03:41 without the schedules, in early June.

Just, you know, we we we knew we couldn't get it done, before the first sale, but we can try and get it done, before the the second sale. And that's and I just wanted to put that out there that that might be what our plan is for this. But June 20 for schedules, is fine, and we are, we have no objection to the entry of this order, your honor.

Great. Thank you. Makes sense. Motion granted.

Thank you, your honor. Next, I turn to the debtor's application to appoint Kroll as their claims noticing agent on the agenda item number 11 and docket item number 18. With respect to this application, a declaration from Benjamin Steele was filed in support of the application, and attached to the application of exhibit b. At this time, I'd like to move that declaration into evidence if necessary.

Motion granted.

Thank you. And we would also respectfully request, entry of the order, related to controls protection applications. Yes.

Most Thank you.

Is this Bonder any did you have an issue with it?

Thank you, your honor. Jeff Bonder from the office of the United States trustee. We did not have an issue with the, the order. I believe all of our, revisions were made, so they were incorporated. We don't have an, we don't object to the entry of this interim order.

Thank you, Robert.

Great. Thank you.

Next, I turn to the debtor's utility motion, which is filed at docket number 12, and it's also listed as agenda item number 12. Through this motion, the debtors seek to establish an adequate assurance account, and approval of related adequate assurance procedures. We have received some comments from certain landlords and revised their proposed order to address those comments, which will be submitted to your honor. And with these changes, we believe that this motion is fully conceptual. And unless your honor has any further questions, respectfully request entry to the proposed order.

Alright. I don't see landlord's counsel with raised hands. Mister Sponder?

Thank you, your honor. Jeff Sponder from the office of the United States Trustee. And I'm sorry to do this, your honor, but now that I thought about it, going back through, several of these orders, they are interim orders, so there are gonna need to be final, hearings. And, I would propose the same date of June 6 at 11:30 for, let's just say, all of the interim orders. And I apologize for not mentioning that because I know some of them got changed from regular orders to interim.

Well, I actually, I was gonna raise it because you mentioned it with with the appointment of Kroll. Is is Kroll an interim?

Kroll Yeah. Kroll Kroll is not an interim, your honor. I believe rejection is not an interim. So there are some that are not interim. But I know the ones that we just went through other than the notice in claims agents and the extension of file.

So creditor matrix, wages, and cash management, I believe, all are all interim orders, to clarify.

Yeah. And so we'll use we'll use that June 6 date at 11:30 for all for all of them. Thank you. Thank you for bringing that up.

As for utilities, your honor, I I was busy with the dip, the last, day or so. So I I I had a question for debtor's counsel, which was whether or not the amount of the adequate protection was included in the, in the motion or in the order. So just if they can confirm that, I don't I as long as the amount's there, I didn't have any issue, with the amount. I just thought it needed to be

in there.

Thank you, your honor.

Miss Hartlop.

Yes, your honor. I can confirm that we included the amount in both the motion and the proposed order.

Great. Alright then. Granted as an interim.

Thank you, your honor. And finally, last on my agenda before you today is the debtor's motion to reject certain executory contracts and leases effective as of the petition date, which is item number 13 on today's agenda and found at docket number 21. Through this order, the debtors request to direct certain contracts and a limited number of leases effective as of the petition date. We have received some comments from landlords, related to if the debtors have surrendered the relevant premises as of the petition date. We have inserted language into the proposed order which will be submitted to your honor that we believe addresses those concerns.

And unless your honor has any further questions, we would respectfully request entry of the proposed order.

Alright. Miss Raviella, I hope I'm pronouncing it right.

Can you hear

me, your honor?

Yes. I can. Thank you.

Thank you, your honor. Jennifer Rovelli of Kelly Dry and Warren on behalf of certain landlords in this case. Your honor, prior to today's hearing, we reached out to debtors counsel and attempted to resolve our concerns with many of the orders. We appreciate their inclusion of those comments. As it relates to the rejection order, I advise to note a couple of points.

You know, given that we're only a couple days into the case, we're still working with our clients to determine if this motion actually impacts any of their locations. But since it's a final order, we feel it's necessary to make the clarification at this point. The change to paragraph seven, I believe, in the let me make sure I have the number right. Sorry. It's paragraph nine in the revised version of the order if your honor has that one.

Okay.

That was a clarification to resolve a concern we had, which was that this order, it's a final order it provides that the rejection is effective as of the petition date. But we don't yet have confirmation that all the locations were actually vacated as of that date. So, this is sort of a compromise that to the extent our client is impacted by the motion, but the premises actually hasn't been surrendered, they can go in and rekey. And they would we would just reserve the right to the extent that that actual situation arises, to potentially bring that issue back in front of your honor if we believe that a different rejection date is appropriate at that time. I don't think that's gonna happen.

I just wanted to note on the record that since we are doing this at a pretty fast pace on the first day, to the extent we find that out, we would just reserve our right to bring that back before the court.

Alright. I you don't need that language in the order. You just want it of record?

Right. And then the second issue, your honor, and now we're looking at paragraph 12 and the revised order, original paragraph 10. This is sort of the this order paragraph I'll refer to it as. We had asked that the debtors would strike the last sentence of this paragraph which says to the extent there is any inconsistency between the terms of the dip order and this order, the terms of the dip order shall control. We just don't believe that's appropriate in a lease rejection order.

Is there something in this order that they believe there's a conflict with the diff order? We'd like to know now to resolve that issue. I'm not sure I raised that issue with debtor's counsel prior to the hearing, and I don't know if they have resolved it or been able to strike that.

Alright. Well, but here, before I turn back debtors counsel, let's let me go to mister Fleischer and see if, so that you at least debtors counsel can address all the issues. Mister Fleischer?

Sure. Thank you. Again, your honor, Scott Fleischer, Barclay Damon on behalf of a number of the debtors landlords. We have a client with a location that's on this projection motion and do appreciate the language that went in there, on being able to rekey now. I was getting some emails on that property during the hearing, and it appears that they're still trying to auction off some of the FF and E that's remaining in there.

So, again, similar type of issue. We're fine, right, with being able to just go in and rekey now, but don't want someone, right, an employee of Rite Aid or otherwise sort of with a a different idea about the premises. So, if we got some clarity on this one in particular, that's fine. Maybe we can take this one out of the order for now and make sure that it can be dealt with appropriately, but, wanted to raise that specific issue. This is a location that's in, Keene, New Hampshire.

Alright. And mister Sponder.

Thank you, your honor. Jeff Sponder from the office of the United States trustee. Your honor, we had no objection to the entry of this interim order or to this order, as our changes were going to be, included. I I kind of jumped ahead there that maybe perhaps based on these issues that this should be maybe an interim order, but, I'll leave that to, to the other parties. Thank you, your honor.

Thank you. Miss Hartlop? I'm sorry. Yes. Miss miss Hartlop, what's your preference you want?

Should it be an interim order and to give you time to address these issues?

I believe our preference is to have an order entered today. To the extent that there's specific issues, like, with respect to the Keene, New Hampshire store, we can serve up with the debtor's advisors and mister Fletcher offline to confirm that information prior to submitting the order to your honor. And with respect to, miss Raviel's concerns with, regarding the dip order language, I believe that, we are confirming with the lenders, that that modification of language, is acceptable, and that was also something that we addressed prior to submitting to your honor.

Alright. Well, then we'll chalk this up to, you'll agree on the language. If there's a problem, we can address it tomorrow. Although you'll let my chambers know. Alright?

Yeah. Yes. Alright.

Thank you, your honor. And unless you have any further questions and to subject to agreement upon that language, we would request entry of that order.

Motion will be granted or to be submitted. If there's an issue, we'll we'll we'll take it up tomorrow. Thank you.

Thank you,

your honor. And with that, that concludes the matters that I have before you today, your honor, and I would like to speed the virtual podium to my colleague, Bryant Cherbrook.

Alright. Thank you. So number 14, I believe.

Yes. Good afternoon, your honor. Can you hear me okay?

I can. Good afternoon.

Good afternoon. I'm going to be presenting the next three items on the agenda beginning with item number 14, which is the debtor's insurance motion, which appears at docket number 11. The debtors are parties to various insurance policies, surety bonds, which are listed in exhibits C and D of motion. Those items are standard in the debtors industry. As a practical matter, those insurance policies and surety bonds are necessary for the debtor's ongoing operations and in certain circumstances are required by operation of law in the jurisdictions which they operate.

The debtors seek authorization to satisfy any amounts owed under those policies and surety bonds pre petition and to continue performing their obligations on a post petition basis. We circulated a draft of the motion to the office of the United States trustee, prior to the petition date and have incorporated, the US trustees comments. And unless there are any additional questions regarding this motion, we would request entry of the interim order.

Alright. Mister Sponder?

Thank you, your honor. Jeff Sponder from the office of the United States trustee. We have no objection to the entry of the interim order as was just stated that we believe our revisions have been or will be incorporated into the interim order. Thank you, your honor.

Alright. Thank you. Motion granted, order to be entered. Order to be submitted.

The next item on the agenda is item number 15, which is the debtor's critical vendor motion, which will be found at docket number 16. The debtors seek to pay certain pre petition amounts owed to various critical vendors. The debtors are in the business of providing retail pharmaceutical products to people, their customers. It's integral that these vital items be continued to be provided to the debtors' customers. The debtors are seeking to pay $3,000,000 up to $3,000,000 to their critical vendors.

All of that is upfront in the interim order. We circulated draft of the critical vendors motion to the office of the United States trustee prior to the petition date, and we've incorporated the US trustee's comments. And unless there are any other questions with respect to the motion, we would respect the interim order we entered.

Mister Sponder? Thank you.

Thank you, your honor. Jeff Sponder from the office of the United States trustee. Your honor, no objection to the entry of the interim order as the US Trustee, requested visions have been and will be incorporated in the interim order. With that said, your honor, we're not sure that there should be many critical vendors concerning the posture of this case where there should only be a few. Thank you, your honor.

Thank you. Makes sense. We'll leave the final hearing for June for June 6, '11 '30. We'll mark this order to be submitted. Thank you.

Thank you, your honor. And then, the last item that I'll be presenting today, which is item number 16 on the agenda, that's the debtors customer programs motion. The debtors seek to, continue certain customer programs as amended and described in the motion on a post petition basis and to honor any pre petition obligations listed in the motion. The highlight items, so to speak, are to, take gift cards, issued by the debtors for the next thirty days after entry of the interim order, and the debtors will continue to accept returns over that same thirty day period. The debtors will provide notices on their website in their stores and that their cash registers, would be changed in these respective policies.

We submitted a draft of the motion to the office of the United States Trustee prior to the petition date and we have incorporated the various comments of the US Trustee in a revised order. Unless your honor has any additional questions regarding the motion, we respect entry we request entry of the interim order.

Mister Sponder, thank you, counsel. Mister Sponder?

Thank you, your honor. Jeff Sponder from the office of the United States trustee. Your honor, with respect to the customer programs, or, interim order, we have no objection to the entry of the interim order. As we understand, our revisions are going to be incorporated. But, your honor, I have no problem doing the same thing for the next, five or six, the the last of them.

But my answer for all of these are is going to be the same, that we have no objection to the entry of taxes, rejection procedures, diminutive asset transactions, record date claims trading, and the NOL, or or interim orders being entered, as our I believe our, revisions have been incorporated. Thank you, your honor.

I could've made we could've cut down a half hour on this if we did this earlier.

Thank you, your honor. Thank you. At this time, I would like to pass the virtual podium to my colleague, Andreas Milaresos.

Alright.

Good afternoon, your honor. Andreas Milaresos, Cole Schatz, PCA, appearing on behalf of the debtors. The first I'll be presenting the balance of the motions today. The first motion, that I'll be presenting is the, the debtor's motion for interim and final orders authorizing the debtors to remit and pay taxes and fees in the ordinary course and to engage in tax planning activities, which was filed at docket number six. The debtors estimate that as of the petition date, they owe 41,300,000.0 in accrued but unpaid taxes and fees, of which 19,800,000.0 will become due in the interim period.

As your honor is aware, this motion was circulated to the US Trustee. Their comments were incorporated prior to filing. And unless your honor has any questions, we would respectfully request entry of the order.

Granted. Next.

Great. The next, item on the agenda is the, debtor's motion to establish proceeding procedures to reject, assume, or assume and assign executory contracts and unexpired leases filed at DACA number 15. As noted earlier on the record, based on comments received from certain parties since filing, the debtors have agreed to remove the assumption procedures from the request of relief. So the proposed form of order will only include procedures to reject. The proposed order was also circulated to the US Trustee.

Their Their comments to the order have been incorporated. And unless your honor has any questions, we will respect respectfully request entry of the interim order as revised to remove the assumption procedures.

Alright. Granted as revised. Thank you.

The next item on the agenda, your honor, is the de minimis assets motion, which was filed at docket number eight. The debtors by this motion seem to establish, authority to use, sell, or transfer de minimis assets to a buyer or group of buyer group of related buyers with an aggregate sale price of less than 5,000,000. The debtors also seek procedures, to abandon assets which cannot be sold at a price greater than the cost of liquidating such assets or which are no longer needed for the debtor's operations. The debtors submit that these procedures will provide an efficient process by which the debtors may engage in de minimis asset transactions while providing adequate notice to the parties. Again, we circulated this order to the US trustee's office.

We've incorporated their comments. We've also incorporated comments received from various parties since the filing. And unless your honor has any questions, we would respectfully request entry of the interim order.

Alright. Mister Fleischer.

Yes, sir. Again, Scott Fleisher, Barclay Damon. Just a clarification for this one. We had received from the debtors, to be clear that no leases would be proposed to be assigned under this order as well just to not, right cloud it and leave it to the motions we've described earlier. So just wanted to put that on the record and make sure the agreement was clear.

We're not gonna squeeze in the lease under the de minimis assets.

Right now, the incorporated language should provide for that.

Alright. Thank you. Thank you, mister Menendez. Motion is granted.

Okay. Your honor, and the next motion on the agenda is the debtor's motion for interim and final orders establishing a record date for notice and sell down procedures, and procedures for notification and trading in certain claims against the debtor's estates, which was filed at DACA number nine. The purpose of this motion is to establish procedures that will allow the debtors to monitor claims against the estates so that the debtors can preserve their tax attributes for potential future use. This interim order, again, includes comments from the office of the United States trustee. Unless your honor has any questions, we would respectfully request entry of the order.

I don't have any questions. I've entered this order countless times. I'm not sure I ever really understood it. That's, motion granted.

Thank you, your honor. The final motion on the agenda, is the debtor's motion for interim and final orders approving notification and hearing procedures for certain transfers of and declarations of worthlessness with respect to the debtor's common stock, which was filed at talking number 10. Similar to the claims trading motion, this debtor will this this motion will set procedures that will allow the debtors to monitor trading and common stock of the debtor New Rite Aid LLC to maintain tax attributes for the debtor's future use. Again, this order was shared with the United States Trustee. Their comments were included.

And unless your honor has any questions, we would respectfully request that the court enter the interim order.

Alright. Well, thank you, mister Miliorasquez. I'll motion is granted. Court will enter the order.

With that, your honor, that concludes our presentation on the orders that are before you today. I will turn the podium over to, co counsel if they want to address anything on the record. I believe we've set the, hearing the final hearing on these, these motions. Yes.

It's June 6. Miss Eaton thank you, mister Melioras. Miss Eaton, anything else to follow-up on?

Just one item, your honor. I believe just for the good order of the record, we know that there are several pending appeals from the, prior bankruptcy case as well as various motions that are pending. It's the company's view that, all the activity from the prior case has stayed. And we did not ask, your honor, for a comfort order of any sort, but I just would like the record to reflect if you agree, that those matters are stayed and will be addressed, in the course later in the course of this case as as required.

Thank you for that. It's important. I know my colleagues on the district court have matters on their plates, with pending appeals. They need to know what to do or what needs to be done or what not doesn't need to be done. The same for my chambers receiving calls on pending matters.

So, the court takes the view, at this juncture, that they are stayed. I see your hands raised. Mister Terrozian.

Okay.

Good afternoon, your honor. It's good to see you again. Jeff Tarosian, for MedImpact. Yes. I have not filed a formal appearance in this matter yet, but we've been watching to, to hear if there was any mention of the appeals.

We take a different view, that the appeals are that the new bankruptcy does not, constitute an automatic stay against the pending appeals because the pending appeals are appeals, from motions brought by the prior debtors, to enforce orders against MedImpact, and MedImpact is appealing that. So those were not cases where MedImpact was suing the debtors, the prior debtors, or the current debtors. Those are appeals of actions brought by the prior debtors against MedImpact. So we don't believe the the current case has an automatic stay that would affect those appeals.

Fair enough. I'm not gonna make a call, obviously. I'm not even sure which court has jurisdiction to make that call, given, normally, a bankruptcy court loses jurisdiction over a matter once it's subject to an appeal. It may be that you all have to, debate that one out in front of the district court. Primarily, what it was focusing on I have several claims objection, cure objections, and the like.

But, I'll your concerns or reservation of rights will cause that way or position as noted. And I'm sure my colleagues, in the just in the district court can can address it. Thank you.

Thank you, your honor. Good to see you again.

Good to see you again. Anyone else? Miss Eaton.

No, your honor. We've we've concluded everything for the day, and I just wanna thank you and your chambers for, accommodating our, our last minute requests, all of your time today, working late getting these orders entered. We are we are deeply appreciative of your assistance today.

My apologies.

So that's all for the debtors.

Thank you. My our pleasure. I'm going to work under the assumption that I will not be seeing you all at 11:30, that you'll hash out, any issues that remain with language. But if the court is needed, we are available. As again, just send please send down all the orders.

Well, we'll coordinate with coal shocks to make sure you get, singular emails instead of multiple emails.

Thank you. Appreciate it. Take care, folks. Court is adjourned.

Thank you. Thank you, your honor.

Okay. We're all. Yeah.