New Rite Aid, LLC and its affiliates are seeking emergency bankruptcy court approval to sell valuable preference claims to a litigation trust, racing against an October 15 deadline that could render the claims worthless if action isn't taken immediately.
The motion, filed October 10 in the U.S. Bankruptcy Court for the District of New Jersey, represents the latest chapter in Rite Aid's complex two-year bankruptcy saga. The debtors are asking Judge Michael B. Kaplan to approve the sale of "Retained Preference Claims" to RAD Sub-Trust A, a litigation trust established during the company's previous bankruptcy case.
The urgency stems from federal bankruptcy law's statute of limitations on preference claims - legal actions that allow bankruptcy trustees to recover money paid to creditors in the 90 days before a bankruptcy filing. Under Section 546(a)(1)(A) of the Bankruptcy Code, these claims must be filed within two years of the original bankruptcy petition, which in this case means October 15, 2025.
Dual Bankruptcy Creates Complex Structure
The current situation traces back to Rite Aid Corporation's initial Chapter 11 filing on October 15, 2023. That case concluded when the reorganized company emerged from bankruptcy. However, the same entities that emerged from the 2023 case filed for bankruptcy again on May 5, 2025, as New Rite Aid, LLC and affiliates.
During the 2023 bankruptcy, certain preference claims were excluded from assignment to the litigation trust and remained with the reorganized debtors. These "Retained Preference Claims" specifically involve "claims or Causes of Action (including Avoidance Actions) against contractual counterparties, vendors, or other go-forward commercial counterparties," according to the 2023 reorganization plan.
The debtors argue they cannot pursue these claims themselves due to their ongoing liquidation process. "Based on the Debtors' ongoing efforts to complete their sale and wind-down process and pursue confirmation of the Plan, the Debtors are not in a position to expend time and additional resources pursuing and prosecuting the Retained Preference Claims," the motion states.
Sale Terms and Structure
Under the proposed purchase and sale agreement, RAD Sub-Trust A would acquire the preference claims in exchange for a percentage of net recovery proceeds. The exact percentage is not disclosed in the public filing but is referenced as being "set forth in the PSA." Thomas A. Pitta serves as trustee of RAD Sub-Trust A.
The debtors emphasize that without this sale, "any recovery on such claims would be lost" due to the expiring statute of limitations. They note that RAD Sub-Trust A's beneficiaries are the general unsecured creditors of the 2023 bankruptcy estates, creating alignment between the sale and creditor interests.
Wind-Down Nears Completion
The current Chapter 11 case represents the final wind-down of the Rite Aid retail pharmacy chain. The debtors report they have "closed all of their retail locations" and completed sales of "a substantial majority of their assets." A reorganization plan was filed in September 2025, though confirmation proceedings have been adjourned.
The motion describes extensive efforts to stabilize operations post-bankruptcy, conduct asset sales, and reduce operational spending through "ongoing store closure and reduction in force efforts to minimize estate costs."
Legal Standards and Expedited Relief
The debtors are requesting several forms of relief under Section 363(b) of the Bankruptcy Code, which governs asset sales outside the ordinary course of business. They argue the sale meets the "sound business judgment" standard and should be approved "free and clear" of any liens or encumbrances.
Given the time constraints, the debtors also seek to waive standard notice periods and the typical 14-day stay on implementing court orders. "To maximize the value received for the Retained Preference Claims, the Debtors seek to close the sale immediately after any hearing," the motion states.
The case is being jointly administered under Case No. 25-14861 (MBK) in the U.S. Bankruptcy Court for the District of New Jersey. Paul, Weiss, Rifkind, Wharton & Garrison LLP and Cole Schotz P.C. represent the debtors.
The motion demonstrates how complex modern corporate bankruptcies can span multiple proceedings and create intricate webs of asset transfers, particularly when valuable legal claims are involved. With just days remaining before the statutory deadline, the outcome will determine whether the debtors can extract final value from their preference claim assets or watch them expire worthless.
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 22 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.