American court hearing recordings and interviews - New Rite Aid, LLC bankruptcy May 7 2025 hearing (first hearing in the second Rite Aid chapter 11 bankruptcy)

Episode Date: May 16, 2025

For more information about the (2nd) Rite Aid chapter 11 bankruptcy proceedings see https://restructuring.ra.kroll.com/RiteAid2025/Home-Index

I'll give everybody an opportunity to adjust their videos as well as I'll take the opportunity to adjust my video all right obviously we have close to 200 we're having some feedback on maybe speakers on your laptop let me let me just Wait, wait, wait, wait, Robert, for you. We're going to be okay. Can you all hear me? Somebody give me a thumbs up. And, all right, let's continue. Actually, bear with it.

Let's continue. Best played, 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.

In lieu of having everyone still playing, unfortunately, the camera here. My apologies, folks. We're coming from the laptop camera. So, what we will... Still having staff, give me a hand here. There we go. Here you.

Oh, I feel so much better. There's little things in life. All right. In lieu of having everyone enter appearances that could take up between an hour, I will ask for appearances 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 the debtor. Good afternoon, Your Honor, Felice Yudgan, Colchatz, PC, proposed co-counsel 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 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 are not admitted to practice before this court,

we have submitted Prohawk-Miche 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 ProHoc applications. Many of them, unfortunately, are making use of the – or not making use of the local form order. 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 going to turn the podium over to Ms. 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, non-controversial applications to the court, and I would request that Your Honor enter those. I think they're pretty self-explanatory in terms of the relief that we are seeking. All right, thank you. As I'll do, I'm sure, repeatedly today, are there any objections? This is Jeff Bonder of the United States Trustee's Office, Your Honor, no objection. Thank you. So we'll mark both of those granted. Thank you. Thank you, Your Honor. And with that, I'll turn the podium over to our co-counsel. Ms. Eaton, good afternoon. Good afternoon, Your Honor. My name is Alice Eaton with Paul Weiss, and we're proposing.

counsel, co-counsel to the debtors. And we're here on behalf of Right Aid, new Right Aid LLC, and it's the affiliated debtors. We have a short presentation for Your Honor, but before I get to that, I just want to note for everyone on the Zoom, we all know that Right 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 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 opportunities for our pharmacists. And we'll also be selling 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 Sidley, 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 want to 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 Loughfer, Chris Hopkins, Sean Mitchell, Allison Benadon, Claudia Tobler, and Nick Christbob. This is among the team that you will hear from today. So why don't we get into, unless Your Honor has questions, we've finally broken loose from work. three friends, one tea time, and then the text. Honey, there's water in the basement. Not exactly how you pictured your Saturday. That's when you call us, Cincinnati Insurance.

We always answer the call, because real protection means showing up, even when things are in the rough. Cincinnati Insurance, let us make your bad day better. Find an agent at cINFIN.com. Go to our presentation. No, I appreciate it. I appreciate your opening comments. I always said at least one of the benefits of having the remote hearings is the transparency,

is the ability to get information out accurately among media outlets, social media, and I think it's important, especially for a case such as this. Thank you. But you can continue. 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. There we go.

There we are. Okay, terrific. So since emerging from Chapter 11 in August of 24, 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 health care and 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 right aid are the heart of our business. Our pharmacists have gone above and beyond to provide care to customers for over 60 years and continue to show up every day with the same dedicated,

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 health care 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, are pharmacy benefits manager business.

And following, we have 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 debtor's corporate structure. It's an entity called Elixir Insurance Company or EIC, and that's the entity which historically offer 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 EICR 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 Ohio Department of Insurance.

We've also been in contact with the Department of Justice regarding elixir's wind down. Your Honor, may recall from the earlier case from our 2023 bankruptcy, EIC and right 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 right aid subsidiaries under the False Claims Act. And under that settlement, the parties, right aid and EIC agreed jointly to pay the United States $101 million in settlement of those claims. we've made $56 million of these payments, and we are in contact with the Department of Justice regarding the outstanding $45 million amount. Let's go to the next page. Your Honor, some of these parties will be familiar to you on behalf of the debtors. We have advising Paul Weiss as counsel and Cole Schatz, Alvarez and Marcell as financial advisor,

Guggenheim Securities as Investment Banker, A&G as our real estate. 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-Trowing. Your Honor, you've seen this slide before. This is a history of our company from its founding in 1962, our many acquisitions, our first Chapter 11 case in 2023, and our emergence in 2024. Let's go to the next page. Your Honor, following the 2023 bankruptcy, this is our, 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 1,277 retail stores across these 15 states, and we have three distribution centers. And currently, we serve 8 million customers across these 15 states, and we dispense 2 million prescriptions every week. Let's go to the next page. So, Your Honor, 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, you know, 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 inventory in 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 $2.1 billion approximately outstanding

under an ABL facility, a philo liquidity facility, one and a half lien notes, and three L 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 right-aids reality quickly became very different than what we all expected at emergence. It was the combination of adverse macroeconomic factors, including lower-consuming spending. You've finally broken loose from work. Three friends, one tea time. And then the text. Honey, there's water in the basement.

Not exactly how you pictured your Saturday. That's when you call us, Cincinnati Insurance. We always answer the call because real protection means showing up, even when things are in the rough. Cincinnati Insurance, let us make your bad day better. Find an agent at CINFIN.com. Something 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 sale 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 2025, 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 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 in those efforts that started during the bankruptcy of 2023, continued and continued to this day. And it results in the ordinary course closure of 29 retail locations and definitive purchase agreements for the prescription files of another 63 stores. Now, Your Honor, we've 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, one store in Brooklyn, one in Vernon, Pennsylvania, and another in Cheshire, Connecticut. And the 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 provided in the form of these of certain escrow funds that were, it's called the CMSR escrow that was created in the last bankruptcy case, and also provided for a shutdown 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 it 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 sale 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 process for the remaining assets that will begin at the end of 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 called 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 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, a 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,

Bougainheim 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 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 13th. The auction, if we need one,

we'll begin on Wednesday, May 14th. Objections, I'm sorry, we'll file, apologies. We will file our, proposed sale order on May 16th. The objection deadline will be the 19th and the sale hearing on May 21st. And as you can see from the right-hand column, the remaining asset sale process, indications of interest will be required by May 30th. And that sale process goes through June with the sale hearing on June 25th. 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 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 a state attorney generals, the Drug Enforcement Administration, the Pennsylvania Governor's Office, the FTC, and the many, 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 $240 million of incremental liquidity on top of the existing $1.7 billion 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 12-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 primes all of the existing ABL and will be senior. Let's go to the next page. The dip, as Mr. Hopkins will walk through, has milestones that are keyed off of our sale process timeline. And, Your Honor, as you can see, if you go back, we have a milestone of June 9th for entry of a final order, and so we will be asking for a final 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 the 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 parties that want to 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 global process. We're calling it the Guggenheim M&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, it can be larger in number, but basically the very ordinary course, a prescription sale and 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 CisNNNCrotunk, as well as an unexpired executive contract and non-residential 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% 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 executive 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

this up for your honor, for ease of reference, we're going to, we're going to, we're going to kick off with our bidding procedures motion and then go to our dip financing motion and our store closing procedures and real property sale procedures motion. Those motions will be covered by Paul Weiss. Then we will hand over the podium to coal shops and they will cover the remaining motions, cash management, wages, etc. 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 here. hearing this afternoon so orders can be entered today. All right. 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 Right Aid are committed to conducting an efficient and value-maximizing sale process. So, Your Honor, if you have any, unless you have any questions, we can go into the next, the first motion on the agenda. and the motion for entry of an order approving our bid procedures. All right. No, I think it makes sense to take these matters consistent with the agenda. I will hear from parties who have concerns or who wish to take issue or object.

Why take down the slides? There we go. All right. 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 Mr. Rifkin and the overall declaration of the chief transformation officer. Excuse me?

I... Thank you. Regarding overall, all of the first day matters, 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 we do that, I forgot. I apologize. Before we get to the motions, we'd like to move the declarations of Mr. 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. All right.

Let me hear if there are any objections or any parties through counsel wish to take the opportunity to cross-examine any of the witnesses with respect to their declarations, understanding that obviously everything's been filed on short in time and, for the most part, interim basis. Ms. Nelson, I see you're a hand raised. I don't know. Yes, Your Honor. 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 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. All right. I'll certainly hear from you further on it. With respect to the declarations of the Rennie Council wish the opportunity to cross-examine, I have any of the declarants that have been identified. The court will accept the declarations in lieu of direct testimony

and to evidence will mark the declaration of Mark Liebman as D1, the declaration of Mr. Rifkin as D2, and the declaration of Elis Freska, by pronouncing it somewhat correctly, she certainly appeared in front of me before, as D3. And then I'll hear concerns again and objections in the course of the presentation. All right. Council want to continue with the bidding procedures motion? Yes, Your Honor.

Your Honor, we have already spent some time outlining our sale milestones and 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 beginning of May and running through June. Parties who are party to NDA as of the petition date, if they want to purchase pharmacy assets, which can also include if they want, they can purchase leases as well,

but if they want to 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 13th. 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 end of June. There are, because of the sensitivity of our pharmacy assets, that's obviously where we want to seek expedited. relief under Rule 6003 for our remaining assets, which can include IP, our ice cream business,

and other and other assets that we hold. They are not nearly as exigent in terms of a speedy transition, and so those can occur on a more ordinary timeline. However, I'll note that the Guggenheim mandate allowed, included the sale of all of these assets, and so the market process for assets, you know, has been, 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. Good afternoon. John Mitchell from Paul Weiss proposed counsel for the debtors. All right. Let me. Please proceed. Thank you, Your Honor.

So, Your Honor, I believe we sent a revised form of order to Your Honor. We've been hard at work with the number of parties who've reached out and given feedback, given feedback on the form of order. I would like to describe a few of the most salient changes for Your Honor, and then I would propose to hear from those parties, and then we can hear from parties that have any further opposition to the order. Grab her pose. Go proceed.

So, Your Honor, first we connected with Mr. Sponder and Ms. Binski from the Office of the United States trustee. And there 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 to the remaining assets with a final hearing on May 21st. All right. That's the first piece.

Okay. Second piece is on the consumer privacy ombudsman. Your Honor, where we landed is that the debtors are seeking an order that they believe their privacy policies allow for the transfer. transfer of the protected data. Therefore, the appointment of a consumer privacy of advancement is not necessary, but that party's rights to raise the issue in the future are reserved. All right, thank you. So that's the first batch of changes. All right. Continue. The second change stems from a meeting with Mr. Eamon-O-Hagan from the United States Attorney's

Office for the District of New Jersey. And there, what the debtor, have proposed to do, and this is in the revised form of order, is in connection with the sale process, the debt is proposed to file the form APA that will be posted to the bidder's dating room this Friday, and then in connection with the winning bid, when it's filed, they will file a red line to through that order to assist parties review of any changes. C-A-L-L-R-D, excuse me. Okay. Thank you.

Continue, please. And then finally, we have a few clarification. A little 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 is also in the revised form of order, is that counterparties to an executory contract or uninspired leases to be assumed and assigned to a buyer will have 14 days.

To clear of any confusion about that, vis-a-vis the objection deadlines for the sale itself. All right. Are those incorporated in the separate motion, dealing with assumptions and rejection of the, of the leases and executive agreements, or is that part of, is that only limited as part of the sale motion? I believe it's part of the sale motion. Just part of the sale, the bidding procedures order that we're asking your honor to enter today. All right. And then finally, we were in contact with the FTC today, and the FTC asked us to confirm something on the record, which I shall do right now.

All right. So for the record, any sale under these procedures will comply with the debtor's privacy policies and state law, including with respect to the opt-out feature. And no customer data will be sold. No customer data will be sold who has opted out. All right. We have that on the record. And is that your initial? presentation? That's initial presentation, Your Honor. I would propose to hear from parties

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 U.S. Trustee. Mr. Sponder. Thank you, Your Honor. Jeff Sponder from the Office of the United States Trustee. Your Honor, we have no objection to the action of the order that incorporates the United States trustees proposed revisions, and, as has been stated, will be final as to the United States. The United States' trustee's proposed revisions, and as to the pharmacy assets, but interim as their remaining assets. Although the issue as to the consumer privacy embudsman is reserved, Your Honor, even if the sales transactions are consistent with the privacy policies, we think a consumer privacy embudsman 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 million customers, as we were just advised, contain immense amounts of individuals, PII and PHAI. The U.S. 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 would 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, Your Honor, even though the privacy policies may be in line with allowing the sale, still someone independent should look at these. Thank you, Your Honor. All right. Thank you, Mr. Sponder. Let me turn to others who wish to be heard.

Let me start. Ms. Nelson, Kimberly Nelson. Let me have your appearance. Thank you, Your Honor. I realized I neglected to introduce myself properly last time. That's all right. Kimberly Nelson. Bankruptcy Council 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 for misrepresenting the extent to which they maintain privacy. of covered information. Covered information under our order includes things like PII and PHAI.

One of our primary concerns, and this is with the caveat that we've had less than 24 hours to review all of this information regarding these sales, and to clarify the prior representation made on the record, we were not contacted pre-petition. We were contacted yesterday regarding this filing. So one of the concerns we see right off the bat is the definition of pharmacy assets

and what is prescription data or PHA or information that is allowed to be transmitted under HIPAA is not clear whether that includes PII. So, you know, you could be a pharmacy customer of Rite Aid, but also not have a prescription with Rite Aid, and they still have lots of PII on you because you're a customer of the store. So, you know, what's not clear is what exactly is being sold. What customer data is being sold? Is it PII? Is it PHA? Is it both?

And 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 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, the, revised CPO report. Some of the problems that we noticed right off the back was there's no analysis of whether the 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, 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 under 363B1B2, the Ombudsman should be reviewing not only the privacy policy, but other applicable law. Our order is other applicable law. And I think it's a glaring oversight for any CPO not to be looking at our order in conjunction with this sale. And finally, there's no analysis in the revised CPO. report that was filed about state-specific provisions and how they affect the sale of assets. It's mentioned in a footnote, but it's not analyzed. So, for example, the current privacy policy, the one that was amended less than a week before

the case was filed, says in a state-specific provision, California's in particular, that only certain specific identified personal PII-type assets can be sold. and no others can be sold of California customers. And there's just no analysis of whether or how the sale complies with that specific provision of the privacy policy. And again, 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 issues compound when it's analyzed and conjunctuary. with our order. So again, these are just a few of the things that we saw in the last 24 hours,

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 a lot of really important information to be missing from a sale involving customer data, whether it's PII or PHA. All right. Thank you, Ms. Nelson. 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. Ms. Hellman, let me have your appearance. Good afternoon, Your Honor.

Leslie Heilman for Ballard Spar. On behalf of a number of the debtors' landlords, current total number right now is north of 50 locations, including Federal Realty, Fairview, Potensky, Crabco, Sterling, Realt. realty income, spirit, and Weiss Markets. Your Honor, I'm also local counsel to another landlord-counsel, Ivan Gold, who I see has his hand-raised as well and would request permission for him to speak at the appropriate time. That's fine. Your Honor, we did work with Mr. Mitchell and Mr. S.S. on our comments with respect to the proposed fitting 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 because the bid procedures did provide for separate assumption and assignment procedures for the leases themselves to the extent that a bidder was seeking the transfer of the lease as part of a larger sale. And 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 14 days notice upon notice of the successful bidder of those assets. So we will have a full 14 days prior in time to any approval of the sale and a transfer of those assets to the buyer. If the objection can be resolved, then the transfer can occur earlier. If the objection cannot be resolved, I'm sure that we will then seek a hearing before your honor in which to have a determination on that objection. But with that clarification that there will be actual notice and adequate time to reveal 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 that we do appreciate the debtors working with us expeditiously to resolve those. All right. Thank you, Ms. Hyland. I appreciate identifying those issues. I'll turn to Mr. Gold now and hear from him as well. Thank you, and good afternoon, Your Honor. Good to see you. I've been gold for a number of the debtors' landlords' current headcount in the 20s.

I join in Ms. Heilman's comments. I'd like to thank Mr. Mitchell and his colleagues for working with us on short notice. To respond to one of your Honor's inquiries, what we focused on initially was harmonizing. As Ms. 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 14-day procedure now is, to a certain degree, uniform among the procedures.

So the landlords will have that 14-day period, notwithstanding the short fuse on the sale transaction, which is necessary in some cases. That that 14-day period will still exist. Hopefully, many of these buyers, we will recognize. 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, a shout-out, thank you to 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 advanced $6,0004,0006, 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 6,0004, 6,000-6-6 waiver applies to the procedures itself. And we have no objection to it applying to the procedures itself because the second we conclude today, the debtor is going to 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 6,0004, 6,0006 waiver or a shortening of time would be appropriate for one of the multitude of potential transactions.

I just want to clarify on the record that we're talking about 6,0004, 6,0006 as to the bidding procedures order. The debtor is free, you know, clear. We're not campering 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 debtors counsel can confirm a later point. The waivers with respect to Rule 6,04 and 2006, relate to this pending motion, the bidding procedures, not to the substantive approval of the sale or any specific sale or assumptions or assignments. Thank you. Mr. Fleischer. Good afternoon, Your Honor. Thank you. Scott Fleischer, Barclay-Daman, 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 14-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 these lies. So again, the 14 days notice will be here. And then there were some emails going on when we get to it, the lease sale and fee. own property procedures in motion, about making sure landlords had appropriate notice there as well. So just highlighting that issue for when we get there. All right.

Thank you. So for the most part, you just want to lay the groundwork for concerns on the notice as you going forward with respect to the individual assumption assignment transactions that are contemplated. Thank you. Yes, Robert. Thank you. Thank you, Mr. Fleischer. All right. I'm looking.

I don't see other hands. As soon as I say that, you know what happens. Ms. Vanek? Good afternoon, Your Honor. Sorry for the late hand. Melissa Vanek 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' Council,

but we would like the cell 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 be complied with by any purchaser of Rite Aid, and we just want to 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 Debtors' Council prior to the hearing.

Understood. Not an issue. Thank you, Ms. Vennack. All right, I still see a hand, Mr. Fleischer, I assume that was just residual. All right, Mr. 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, Ms. Nelson.

Yes. Ms. Nelson's concerns. So the first point I make is this is not a consumer privacy ombudsman report. This is a declaration in support of bidding procedures. and what we're asking, Your Honor, 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 will. And 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 the sale under Section 363. And for that, we will file 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. I think kind of a related point there is that what I heard is a potential sale issue. It is unclear whether the sale will do this. It is unclear whether the sale will do that. Well, the reason it is unclear whether the sale would 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 your honor. third point I'd make is that the finding that Ms. Nelson mentioned in connection with our addressing the U.S. trustees' comments, now that finding reads that the debtors are asserted that the proposed sale transactions are consistent with their privacy policies and therefore a consumer privacy on buds, but it is not required. So there is actually not even a finding anymore that the debtors did not make these certain disclosures on their on their policies, it's just a finding as to the debtors assertion their policies 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

the appointment. Correct. Correct. And I've not heard anyone make a motion on short notice for an appointment of one. And anything else? And then the last point is to address Ms. Van Eck, I believe. I think that, too, is an issue for the sale order, and we're more than happy to work with the government on us. All right. Thank you.

Anyone else wish to be heard? At some point, I do want to hear from the lenders. Probably it's more appropriate when we address the dip-finance motion. At this juncture, what's before the court is the approval on a recognizably trunk. scheduled for bidding procedures and the processing parameters of the sale of both the pharmacy assets and the non-pharmacy assets. The court appreciates 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 million individuals getting their pharmaceutical needs or their medicinal needs addressed 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 the pharmacists involved, and continuity for the benefit of the benefit of the benefit of the employees. It all works together.

The stores need to continue their operations and to work in assisting an orderly transfer and will do so in a quick process, which is why I'm going to approve this expedited time frame. The objection, and I want to thank both counsel for those who've raised objections and concerns

as well as debtors' counsel for having addressed and undertaken so much of the work prior to this hearing, obviously. I think it becomes obvious that this has not been a 60-day marketing period or a 30-day marketing period. 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 21st hearing or the June 25th, scheduled hearing for non-pharmacy assets. We'll address them then if they remain unresolved. With all these orders, I would like to take the opportunity to review the redlined and marked-up versions. You let me know. I hear from Debtors' Council. I would like to enter these orders in an orally fashion, possibly tomorrow morning by like 10 a.m.

But it'll give me the opportunity tonight to review the changes to the orders. Does that pose a problem? I think it does, Your Honor. Okay. I'm told that, especially with respect to the dip, we're going to 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 Honor, I do think it's important to have the order enter today so we can have the comfort that the parties can move forward. When will... Do I have a final version of what's been marked up? Yes. Oh, no, we're asking me. Well, I just want to ensure that I have...

I don't want to confuse the docket start entering orders when there's been language changes. I could take the time after the hearing, assuming we get done in time to have them entered, but where do we stand as far as getting the language? Your Honor, please, Jedkin, from Cole Schott, To the extent that revised redline orders are not in your inbox, we will ensure that immediately following the hearing that you have the most updated versions of the order.

All right. Well, if that's the case, I'll make sure they get entered then. Ms. Nelson? Yes, thank you, Your Honor. Kimberly Nelson. I'd like a copy of these redlines since we have not been given a courtesy copy. I think that's fair. Absolutely.

We'll get that to you. We will get that to you out of the House right away. Anything sent down to the court, make sure they get circulated as appropriate. All right. But for the record, the court will grant the motion 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. Can you hear me okay?

Yes, I can. Good afternoon. For the record, Christopher Hopkins of Paul Weiss, Rift, and Garrison has proposed co-counsel to the debtors. It's good to be back before your honor and reiterate all my colleagues' comments, thanking the court, the U.S. 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, was filed at docket number 67. All right. Thank you. So, Your Honor, we're here today seeking approval of a $1.94 billion dollar 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 in that it has a revolving facility that's being sized at $1.7 billion. and then there's a Philo facility that's at $240 million. This is a 12-month facility, and with these arrangements, pursuant to the terms of the dip docs and the approved budget, you know, 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, you know, for all the reasons set forth in Mr. Lehmann's declaration, that this financing is really the – is not only the best, but it's really the only viable financing that we – that was available to the debtors to fund these cases. And without the use of consensual – sorry, Your Honor, without the consensual use of cash collateral and the incremental liquidity that's being made available under the dip facility, you know, 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 12-month facility.

You know, as I said, it's a $1.7 billion revolver and a 240 million silo. 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, you know, the cash collateral that we're allowed to access during the case. And, you know, that is really essential to ensure that, you know, as Your Honor knows, things happen in Chapter 11, and that incremental liquidity provides a cushion. to ensure that all of our operations continue uninterrupted, all of the obligations that come up, you know, 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, You know, 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, you know, every day we get operating receipts. At the end of 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, you know, 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 dip documents do provide for a full roll-up of the pre-petition AVO. And I would note, Your Honor, that in this goes to some of the hard-fought negotiations we had, getting into the case, the interim roll-up does actually save the estate.

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 as the dip rolls up over over the interim period there is a fee package for the dip lenders they get a upfront fee that's paid in kind equal to 1% of the revolver one and a half percent of the philo. There is an exit fee that's payable at maturity, but importantly, you know, 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 in any amount that's prepaid prior to nine months, 50 percent discount to the exit fee. But the aggregate exit fee is 10 percent. Your Honor may have read in the dip papers that the, 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-dip lenders who overfunded their pre-petition commitments. Okay. Otherwise, you know, it's a pretty customary set of covenants, including, you know, the standard budget approval process, in related variance testing on receipts and disbursements, we are agreeing to a milestone schedule that, you know,

effectively traps 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 and value. The pre-petition ABL is getting fees in 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 or preserved. Otherwise, just to hit some other points, you know, there's a customary carve-out. there are no statutory waivers contemplated for today. So 506C and 552B are up for approval at the final hearing. And otherwise, you know, customary challenge period, we're asking for 60 days after entry of the interim order or respect to the committee 60 days after the committee is appointed,

which, as Mr. Sponder said, we hope is sometime next week. So with that, your question, 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 U.S. 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. completed 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? Where are we fitting that final in among these milestones? So, Your Honor, I believe if we're going to have our second day hearing on June 6th that that falls within the dip milestone for entry of the final order. The milestone is 35 days after the petition date. Okay, so June 6th is a Friday that would peg it at 1130 in the morning. Let me hear from others first before we solidify that. Before I turn to anyone else with a raised hand, Mr. 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 motion and the supporting documents. Mr. Ventola, good afternoon. Good afternoon, Your Honor. I hope you can hear me okay. I can't, 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 wanted 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. with the exception, Your Honor, of any claims under Section 549 of the Code, we don't expect 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. All right, thank you. But at this point, I prefer to hear from others. If I have, I'll come back to you, Mr. Venthal. Thank you for your time.

Thank you. Mr. Sponder. Thank you, Your Honor, Jeff Sponder from the Office of the United States trustee. Your Honor, we provided requested revisions this morning. We realize that an interim order will be entered, but would 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 understand from Banks Council the 549 issue, but I did hear that there is going to be a possible issue with McKesson as to whether or not the, however much money, I think it was $400 million or something, 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 wasn't sure if that was in the order in the first case. But Your Honor, with respect to the roll-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 comfort in allowing the interim roll-up. Again, there's going to be another roll-up at the final, and hopefully we'll have committees in to deal with that.

But one issue, main issue that I had before this order can get entered, even if we don't go through my other issues, is there's reference to paragraph numbers, and I think the reference is wrong. There are a lot of references to paragraph 11, which should be paragraph 12, which is actually the challenge paragraph. So those need to be changed for purposes of the interim order. So we need to clean up. Yes, and my other issues, I mean, I've already sent over to counsel. 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 know, the investment banker. I think they're the investment banker. So I'm not sure how that will work. But I can go through those issues briefly, Your Honor. I do know one of which is I think that they're seeking the challenge period 60 days for parties in interest from the interim order. We typically ask and get 60 days from the final order.

So that was one thing that we included in there. We also included some other NITS as well. But thank you, Your Honor. All right. Thank you. I'll hear from Dennis' counsel on what they're prepared to address. Mr. 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. Ron, I just wanted to make a few points, and we'll 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 dollar volume of the debtor's prescription drugs, and McKesson's deliveries to Rite 8 can total, you know, anywhere from $20, $40, $40 million or more products per day. since we emerged or since Rite Aid emerged from bankruptcy last year, the relationship 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 provisions. Turning to where we are today, McKesson is owed at least $130 million of trade debt as of the petition date.

That's not an agreed upon number, which I'll touch on again momentarily. All of that amount, Your Honor, again, falls within the confines of Section 503B9, 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 mentioned a minute ago. As Ms. Eaton noted, McKesson has continued to supply right 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 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 the debtors have committed to help get the McKesson's line. Is there anything exciting in the last?

Finally, just a point I alluded to a minute ago, we have a disagreement with the debtors involving the characterization of a picture. 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 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, McHesson will reserve all its rights with respect to today's motions for the final hearing. That's all I have, Your Honor. Thank you. All right. Thank you, counsel. And if needed, you all know where to find me. Thank you. All right.

Mr. 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 Pro Hocque-Vice 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 Right Aid, whereby Right Aid sells prepaid debit cards and other financial products to its customers. And then those customers may have the opportunity to come back to Right Aid and to reload the cards. And what that means is that every day, Right Aid receives possession of funds from those customers, which under the terms of the agreement, it's then required to hold in 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 want to make two points in connection with this motion and in connection with the cash management motion. First, my understanding is that this 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 supply

product to right 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. All right.

So we're carving out and noting that for the inclusion in the final order when we get there, assuming we get there. Thank you, Your Honor. Thank you. Mr. Gold, is it 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 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 separately filed. And we do anticipate Stubrout 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 debtors and the lenders and the UCC going forward in advance of the final hearing, which you've tentatively identified for early June. Thank you.

All right, thank you. Ms. 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 wanted to just appear quickly for the record. We have no objection to the entry of the interim dip order.

We support its entry. I did just want to 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 note that for the record and indicate that we're supportive of the entry of the interim bid order today. All right. Thank you, Ms. Ringer. Thank you, Your Honor. All right, Mr. Hawkins, let me turn back to you.

I know Mr. Sponder raised some specific issues. Yes, Your Honor. So let me kind of take them a bit out of order. Sure. So on Guggenheim's fees, there's actually language in the bidding procedures order that addresses that. As a general matter, you know, 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 things. So, you know, I think, you know, 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. 60 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, you know,

I think it's given that the committee is going to have 60 days, I, I, I, I think it's, given that the committee is going to have 60 days, I think it is reasonable. And it's also, you know, it could be part of, 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. Spondor's cleanup. Obviously, the order was changing significantly in the lead up to the filing. So that was our miss. On the comments from McKessons Council, I'll just say,

say that, I mean, we generally agree. We hope we can get things resolved, but we obviously we know where to find Your Honor. And then finally, I always take great pride in any kind of compliment from Mr. Gold, so I appreciate that. Unless Your Honor has any other questions for me. I mean, I think our plan is to circulate an updated order. Obviously, we've got to get the banks to sign off on that. We'll send it to Mr. 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 Mr. Vintola would like to add anything here. I'll turn to Mr. Vantola in a second. My only concern is, I guess it's 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. 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 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 of what you all do in the loop. Mr. Ventala? 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 it triggered off the interim order and or the appointment of the committee, having the 60 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 U.S. 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 the debtors are granting liens on property that is not theirs, nor could they, so we are not seeking any liens against property, not of the estate.

And again, if there are any other questions, you have, Your Honor, please let me know. Thank you. All right, thank you. Mr. Sponder. Thank you, Your Honor. Jeff Sponder from the Office of the United States Trustee. Your Honor, as you know, it is normal to have the 60 days. from the final order for parties and interest and then 60 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 60 days from the appointment of the committee. We'll try and get that in as quick as possible. I also realize that the second hearing isn't going to be until June 6th a month away. So I understand that would be a lot of time. But my thought was maybe as a compromise to do 60 days for parties and interest and the committee from the appointment of the committee. Thank you, Your Honor. All right. Thank you, Mr. Sponder.

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 22s. It's not something that we strive for. 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's a narrow window to examine. It's a smaller path to have to proceed upon by any committee. What I'm going to do is include in the order and permit the 60-day challenge period to run from the interim.

If there's a problem 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. make sure that happens, and I'll hear why they need more time, and if it's reasonable, I'll address it. But 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 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. and we'll fix that for June 6th at 1130,

and I will go ahead and I will approve the finance on an interim basis as discussed and described. All right. I believe that takes us to the fifth item on the agenda, and I'll hear from Devers Council. Thank you, Your Honor. I'll cede the podium to my colleague, Nick Christwell. Great. Thank you.

Your Honor, Nicholas Kraslov, Paul of Vice, opposed 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 in landlords, trade counterparties, and the U.S. trustee.

The revised order will reflect comments from the landlords regarding side letters, changes largely conforming to the orders entered in the 2023 cases. Language reflective of discussions with the U.S. trustee regarding the debtors' consumer privacy policies as well as the payment of the consulting fees. 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.

consultants 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 relief requested under the motion is substantially similar to the relief that was granted in 2023 cases, and accordingly we would request that Your Honor grant this order subject to, obviously, the caveat on the consultant's PEPs. All right. Thank you.

Mr. Sponder, any issues you wish to raise? Thank you, Your Honor. Jeff Sponder from the office, the United States Trustee. The United States Trustee has no objection to the entry of the interim order, as we understand our requested revisions have been or will be incorporated in the proposed interim order. Thank you, Your Honor. All right. 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 time, June 6, 1130. Thank you, Your Honor. Thank you. I will hand the podium over to my colleague. 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 leeks 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 U.S. 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, et cetera. These are procedural motions that are intended to establish a streamlined auction and sale process for leases and fee-owned 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 especially leases more synchronized, I can stay on the record. Again, this is as it relates to docket number 22, that we will agree to extend the objection deadline 14 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, 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 U.S. trustee into the revised procedures. I'm not sure, as I say, here right now that we've resolved everything, and I do want to make sure to give counsel opportunities 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 executive 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 all right thank you let me go to the raised hands mr. Fleischer yes for honor again good afternoon stop Fleischer Barclay

Damon on behalf of the number of the letters landlords we do appreciate the the 14-day clarification because that was one of the issues that was still pending when the hearing was beginning, so happy to hear that part. It sounds still like there's going to be potentially two objections that landlords have to make. It's that initial one with 14 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 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 assignee is going to be made clear when adequate assurance information needs to be provided. So I wanted to get some more on that one. All right. Thank you. Ms. Howman? Thank you, Your Honor, for the record, again, Leslie Heilman-Ballard Spar, on behalf of the number of the debtor's landlords,

as noted on the record earlier in this hearing. Your Honor, Mr. Fleischer has pointed out 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 the hearing to the sale procedures order, and we don't take any issue with the debtors seeking approval procedures to run an option process and solicit bids for the sale of their leases. And my understanding of the timeline is that for those auction procedures, they're proposing that they file an

option notice that will identify when the option will be held and when objections to the option procedures will need to be raised, which I understand that is. So it's my understanding, it's a 21-day notice process in which parties will have 14 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 procedures are silent as to the timeframe 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, understand Ms. Togler correctly, they're going to file a notice, and we will have 14 days in

which to file general objections to any sale of the lease and option process. Then the option 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 it's a 21-day process and the auction is held at or around the time of the 14-day objection deadline. That means the option only leaves seven days before the sale hearing. So if we have a successful bid notice filed on 14th 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 remaining assets. What these procedures set up is for a sale 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. 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 Watts, Joanne's, and Party City, where there has been numerous rounds of Lisa's sole. And in each of those, there was 14 days or 21 days notice of those actual sales in which we went from an auction or a notice of a successful bidder to final approval by us at a sale hearing. And we needed each, I can assure you, 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 Beglot. There was over, I'm sorry, it was 300 and some in Bay Blatt, over 240 leases in Party City. and those weren't just to a single buyer.

They were to, at any given time, we had 10 leases in play in which were being sold to 10 different buys. So 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 on some re-referinged,

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 at a minimum require at least 14 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 lease at least 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. All right. Thank you. Thank you for clarifying. Mr. Gold, and then I'll get to Mrs. Fonder. Thank you again, Your Honor. Ivan Gold for a number of the debtors' landlords.

I would just like to join him. As Heilman's comments, a note for the court, the simplest way to look at how these procedures are different is, as Ms. Hylman 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 debtor's 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 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 think that's the lens you should look at this. 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 just want to echo Ms. Heilman's comments and point out to Your Honor. These are the hard ones. Thank you.

All right. Thank you. Before I address those issues, Mr. 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 U.S. Trustee requested revisions have been or will be incorporated in the interim order. Thank you, Your Honor.

All right. So it sounds like we're close, but there needs to be some tweaking. or some more work done. I think Ms. totally have 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 want the court with respect to the interim order to come down and decide if there's an issue that you can't resolve, but it has to be included in the interim order, then I'm going to leave open 1130 tomorrow morning after my ordinary Thursday morning calendar, and I can address this or if we have with other 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 could agree, great. If not, I'll make the call tomorrow if it can't wait until a final hearing. All right.

So, will 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 you need the court's attention additionally tomorrow. Hopefully it will 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 you all on hold.

Don't go anywhere. We'll just turn off the video and the audio. Thank you. Be back in five. Thank you, Your Honor. Thanks. and we are back let everybody else

come back as well looking for debtors council who wants to there we go who's taking the chair your honor um please yetkin from Colchatz if we're ready to move on to the next

agenda item Mark Zuckerman from Cole Schatz is going to handle the next item on the agenda which is number seven on the court's agenda We are ready. Mr. Zuckerman. Okay. Up, you 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 number seven and eight on the agenda. All right. 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. Your Honor, I'll just say that the cash management system is substantially the same as when the debtors filed in 23, 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 minimis activity, and the debtors don't. expect to have any cash transactions with those accounts. We've provided the U.S. trustee's 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. MR. Mr. Sponder.

MR. Good afternoon, Your Honor, Jeff Sponder from the Office of the United stage trustee, as I'm going to 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 U.S. Trustee requested revisions have been or will be incorporated in the interim order. Thank you. All right. I'll just check in with you with each one. Thank you, Your Honor. Mr. Vandola. Thank you, Your Honor, John Vintola, on behalf of Bank of America. We don't have any comments

in the order, and 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 we're going to be. It 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 support the motion. The order as is, thank you. Our goal is to 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 our chamber's email address. Our staff can get, with just a note that they have all been agreed to or the original without any modifications, and we'll get them entered. Number eight, Mr. 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 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 debtors employees are the lifeblood of the company. 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 U.S. trustees' 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. Mr. 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 U.S. trustees' requested revisions have been or will be incorporated into the interim order. Thank you, Your Honor. All right. Motion is granted. Thank you.

Thank you, Judge. With that, I am going to turn the virtual podium over to my colleague, Ms. Hartlett, who will be taking the next items on the agenda. Thank you. All right. Thank you. Good afternoon, Your Honor, for the record, Moisa Hartwood, the Colshops, proposed co-counsel to the debtors. Thank you for accommodating our schedule this afternoon, and this is my first time appearing in this district, so it's a pleasure to be here. Welcome. Thank you.

first of my list of items before you today is the debtors motion authorizing the debtors to file consolidate a list of their 50 largest unsecured creditors and their creditor matrices and to redact 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. Mr. 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 U.S. trustee requests revisions have been it will be incorporated into the interim order. Thank you, Your Honor. You should just have that as a screensaver. All right, granted.

Thank you. Next day 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 requests a 28-day extension to file their statements and schedules, and this would push the deadline to June 20th. We have agreed upon the state with the Office of the United States trustee and accordingly respectfully request entry of the proposed order. Any change to the timeframe?

Mr. Sponder? Thank you, Your Honor. Jeff Sponder from the Office of the United States Trustee. Yes, the timeframe was changed to June 20th and agreed upon just to alert the court. The United States trustee may conduct a 341 without the schedules in early June. Just, you know, we knew we couldn't get it done before the first sale, but we can try and get it done before 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 20th for schedules is fine, and we are, we have no objection to the entry of this order, Your Honor.

Great. Thank you. It makes sense. Motion granted. Thank you, Your Honor. Next, I turn to the debtor's application to appoint Kroll as their claims noticing agent. I found at 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 as necessary. Motion granted. Thank you.

And we would also respectfully request entry of the order related to Crows. motion application. Yes. Thank you. Mr. Sponder, any, did you have an issue with it? Thank you, Your Honor. Jeff Sponder from the office, the United States trustee. We did not have an issue with the order. I believe all of our revisions were made, so they were incorporated, so we don't have an, we don't object to the entry of this interim order. Thank you, Your Honor. 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 debtor seek to establish

an adequate assurance account and approval of related adequate assurance procedures. We have received some comments from certain landlords and revised the 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. All right. I don't see Landlords Council with raised hands, Mr. Sponder. Thank you, Your Honor. Jeff Spondor from the Office, 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 going to need to be final hearings. And I would propose the same date of June 6th at 1130 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, actually, I was going to raise it because you mentioned it with the appointment of Crowell. Is Kroll at interim? Kroll? Yeah. 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 noticing claims agents and the extension of file. So credit or matrix, wages, and cash management, I believe are all interim orders to clarify. Yeah. And we'll use that June 6th date at 1130 for all of them. Thank you.

Thank you for bringing that up. As for utilities, Your Honor, I was busy with the dip the last day or so. So I had a question for Debtors Council, which was whether or not the amount of the adequate protection was included in the motion or in the order. So just if they can confirm that, as long as the amounts there, I didn't have any issue with the amount. I just thought it needed to be in there. Thank you, Your Honor. Ms. Hartlop. Yes, Your Honor.

I can confirm that we included the amount in both. the motion and the proposed order. Great. All right, then granted as an interim. Thank you, Your Honor. And finally, last on my agenda before you today, the debtor's motion to reject certain executory contracts and leases affected as of the petition date, which is item number 13 on today's agenda

and about at docket number 21. Through this order, the debtors request reject certain contracts and a limited number of leases affected as of the petition date. We have received some comments from landwards 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. All right. Ms. Revella, I hope I'm pronouncing it right.

Can you hear me, Your Honor? Yes, I can. Thank you. Thank you, Your Honor. Jennifer Revelli 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 Council 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 rise to note a couple of points.

Given there were 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 a clarification at this point. The change to paragraph 7, I believe, in the – let me make sure I have the number right. Sorry, it's paragraph 9 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 at 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 re-key. And we would just reserve the right to the extent that that factual 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 going to happen. I just wanted to note on the record that since we are doing this at a pretty fast pace on the first day, so the extent we find that out, we would just reserve our rights to bring that back before the court. All right. You don't need that language in the order. You just wanted a record? Right.

And then the second issue, Your Honor, and now we're looking at paragraph 12 in the revised order, original paragraph 10. This is sort of the dip 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 is a conflict with the dip order, we'd like to know now to resolve that issue? I'm not sure I raised that issue with debtors counsel prior to the hearing, and I don't know if they have resolved. resolved it or been able to strike that.

Here, before I turn back debtors' counsel, let me go to Mr. Fleischer and see so that at least debtors' counsel can address all the issues. Mr. Fleischer? Sure. Thank you. Again, Your Honor, Scott Fleischer, Barclay, Damon, on behalf of a number of the debtor's 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 re-key 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&E that's remaining in there. So again, similar type of issue. We're fine, right, with being able to just go in and re-kina, but don't want someone, write an employee of Rite or otherwise, sort of with 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.

All right. And Mr. Sponder. Thank you, Your Honor, Jeff Sponder from the office, 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 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 the other parties.

Thank you, Your Honor. Thank you. Ms. Hartlett? I'm sorry. Yes. Ms. Harlet, 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 enter today to the extent that there's specific issues, like with respect to the keen,

New Hampshire store, we can circle up with the debtors' advisors and Mr. Fletcher offline to confirm that information prior to submitting the order to your honor. And with respect to Ms. Reveal's concerns regarding the dip order language, I believe that we are confirming with the lenders that modification of language is acceptable, and that was also something that we addressed prior to submitting to your honor. All right. Well, then we'll talk this up to you'll agree on the language. If there's a problem, we can address it tomorrow.

You'll let my chambers know. All right? Yes. Thank you, Your Honor. And unless you have any further questions and subject to agreement upon that language, we would request entry of that order. Motion will be granted. Order be submitted.

If there's an issue, 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, Grant Chabuck. All right. Thank you. 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, insurty bonds, which are listed in exhibits C and D of the motion.

Those items are standard in the debtor's industry. As a practical matter, those insurance policies and surety bonds are necessary for the debtors' ongoing operations, and in certain circumstances are, required by operation of law in the jurisdictions which they operate, the debtor 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 U.S. trustee's comments. and unless there are any additional questions regarding this motion, we would request entry of the internal order. All right. Mr. Sponder? Thank you, Your Honor. Jeff Sponder from the Office of the United States of 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. All right, 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 debtor's customers. The debtors are seeking to pay $3 million, up to $3 million to their critical vendors. All of that is up front in the interim order. We circulated

a draft of the critical vendors' motion to the Office of the United States trustee prior to the petition date, and we've incorporated the U.S. trustees' comments, and unless there are any other questions with respect to the motion, we would respect the interim order be entered.

Mr. Sponder? Thank you. Thank you, Your Honor. Jeff Sponder from the office, the United States Trustee. Your Honor, no objection to the entry of the interim order as the U.S. Trustee requested visions have been or 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, or there should only be a few. Thank you, Ron. Thank you. Make sense. We'll leave the final hearing for June 6,

the 1130. We'll mark this. order to be submitted. Thank you. Thank you, Your Honor. And then the last item that I will be presenting today, which is item number 16 on the agenda, that's the debtor's 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

to 30 days after entry of the interim order, and the debtors will continue to accept returns over that same 30-day period. The debtors will provide notices on their website in their stores and at their cash registers of the change 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 U.S. trustee in a revised order, unless Your Honor has any additional questions regarding the motion, we request entry of the inter-ordered. Mr. Sponder, thank you, counsel. Mr. Sponder.

Thank you, Your Honor. Jeff Sponder from the Office, the United States Trustee. Your Honor, with respect to the customer programs or intermorder, 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 last of them, but my answer for all of these 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 interim orders being entered as I believe our revisions have

been incorporated. Thank you, Your Honor. We could have 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 Milarecirasis. All right. Good afternoon, Your Honor, Andreas Mierrezis, 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 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 41.3 million in accrued but unpaid taxes and fees, of which 19.8 million will become due in the interim period. As your honor is aware, this motion was circulated to the U.S. 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 debtors motion to establish procedures to reject assume or assume and assign executory contracts and unexpired leases filed that docket 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. object. The proposed order was also circulated to the U.S. trustee. Their comments to the order have been incorporated, and unless Your Honor has any questions, we would respectfully request entry of the interim order as revised to remove the assumption procedures.

All right. 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 seek to establish authority to use, sell, or transfer to minimis assets to a buyer or group of buyer, group of related buyers with an aggregate sale price of less than $5 million. 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 U.S. Trustees 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. All right. Mr. Fleischer. Mr. O'R. against Scott Fleischer, Berkeley, Damon. Just the 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

write 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 going to squeeze in a lease under the de minimis assets. Right, for how incorporated language should provide for that. All right, thank you. Thank you, Mr. Mayor Sesey's motion is granted. Okay, Your Honor. 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 debtors' estates, which was filed at docket 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, and 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 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 docket number 10. Similar to the claims trading motion, this debtor will – this motion will set procedures that will allow the debtors to monitor trading and common stock of the debtor New Right 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. All right. Well, thank you, Mr. Miller-Rassies. I'll – Motion is granted. The 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 final hearing on these motions. Yes, June 6.

Ms. Eaton. Thank you, Mr. Miller-Earcy. Ms. 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 is 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,

required. Thank you for that. It's important. I know my colleagues and 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 hands raised. Mr. Tarotian. Good afternoon, Your Honor. It's good to see you again. Jeff Terrosian for Med Impact. I have not filed a formal appearance in this matter yet,

but we've been watching 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 Med Impact and Med Impact of the appealing net. So those were not cases where Met Impact was suing the debtors, the prior debtors, or the current debtors.

Those are appeals of actions brought by the prior debtors against Med Impact. So we don't believe the current case has an automatic stay that would affect those appeals. Fair enough. I'm not going to 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 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. I primarily want to, was focusing on I have several claims, objection,

cure objections and the like. But your concerns or reservation of rights will call it that way, our position is noted, and I'm sure my colleagues in the district court can address it. Thank you, Your Honor. Good to see you again. Good to see you again. Anyone else? Ms. Eaton.

No, Your Honor. We've concluded everything for the day, and I just want to thank you and your chambers. for accommodating our last-minute requests all of your time today. Working late, getting these orders entered, we are deeply appreciative of your assistance today. So that's all for the debtors. Thank you. My pleasure. I'm going to work under the assumption that I will not be seeing you all at 1130,

that you'll hash out any issues that remain with language. But if the court is needed, we are available. as again, just please send down all the orders. We'll coordinate with coal shocks to make it where you get singular emails instead of multiple emails.

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