Wednesday, Walgreen Co. (WAG) announced that the Drug Fair Group, Inc. and its parent company CDI Group, Inc. have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court for the District of Delaware. Drug Fair entered into an agreement with a subsidiary of Walgreen Co. to sell substantially all of its assets associated with 32 of its stores to Walgreens.
In connection with the Chapter 11 filing, Drug Fair said that it has arranged a four-month secured debtor-in-possession financing facility or DIP Financing, in the amount of $40 million. After approval, proceeds from the DIP Financing would be used by Drug Fair to fund its operations during the Chapter 11 proceedings and should enable it to continue to satisfy its obligations associated with its remaining operations, including payment of employee wages and benefits and post-petition obligations to vendors.
Tim Boates, Drug Fair's Chief Restructuring Officer, commented, "After exploring alternatives following a thorough consultation with its legal and financial advisors, Drug Fair's board of directors determined that an orderly sale of the company's assets through a Chapter 11 process, together with those assets sold prior to the Chapter 11 filing, would be the most prudent and effective way to maximize value for Drug Fair's stakeholders. We feel we have identified a great company to carry that service forward into the future."
Tim Anhorn, Walgreens market vice president for the Northeast, said, "Drug Fair has been a respected pharmacy in this region for more than 50 years. Customers will continue to see many of the familiar faces behind the counter they trust for their health care needs."
Additionally, prior to its Chapter 11 filing, Drug Fair sold various assets at 13 locations to third parties, including Walgreens who purchased prescription files from the 11 Drug Fair locations.
WAG is currently trading at $24.02, down $0.27 or 1.13% on a volume of 3.8 million shares on the NYSE.
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