Pharmaceutical giant Rite Aid is filing for bankruptcy protection in its efforts to cope with declining sales and financial losses associated with the over 1,000 federal, state, and local opioid-related lawsuits it has had to face over the years. Rite Aid has settled a majority of these lawsuits over the past couple of years, with the most recent settlement announced last year involving West Virginia and amounting to $30 million.

Rite Aid shares that as it goes through Chapter 11 bankruptcy, it will continue to serve customers needing to fill their prescriptions. Currently, the Philadelphia-based company operates over 2,000 stores in 17 states. Most of its stores are scattered along the East and West coasts.

Rite Aid says that it has reached a financial restructuring agreement with its creditors that would allow it to pay off its debts and position itself for growth as it comes out on the other side of bankruptcy proceedings. However, as of now, those bankruptcy proceedings may prove to be lengthy as the company has faced substantial losses in revenue from its declining sales and limited streams of income.

The company filed bankruptcy in U.S. Bankruptcy Court in New Jersey and listed $8.6 billion in total debts and $7.6 billion in total assets. The company also announced that Jeffrey Stein would be the company's new CEO, replacing Elizabeth Burr who acted as interim CEO after Heyward Donigan left in January. Stein also runs his own advisory firm and has experience leading companies that are undergoing financial restructuring.

Under federal bankruptcy law, Chapter 11 bankruptcy allows a company to undergo a financial reorganization while still allowing it to continue with day-to-day operations. A company is still obligated to pay back its creditors under a Chapter 11 bankruptcy.

In contrast, under a Chapter 7, or “liquidation bankruptcy,” a repayment plan is not put in place but a company is required to sell its assets to pay back creditors. While Chapter 7 is the most common form of bankruptcy for individuals and small business owners, larger companies like Rite Aid could benefit from the reorganization offered by a Chapter 11 bankruptcy.

According to documents filed with the bankruptcy court, one of the company's biggest holes in its sinking ship has been because of underperforming stores. Over 200 locations have been closed in recent years because of underperformance, with more stores expected to close during bankruptcy proceedings. Losses associated with the opioid-related lawsuits have only hindered the company’s struggle with profits over the years.

Currently, Rite Aid is reported to have $134 million in cash, the ability to borrow up to $390 million, and $524 in liquidity. According to financial documents, over the past six years, the company has racked up $2.9 billion in losses with $3.3 billion in long-term debt. Although Rite Aid informed the New York Stock Exchange earlier this month that it was not in compliance with listing standards, the company continues to be listed and traded during its current grace period.

The company shares that moving through Chapter 11 bankruptcy will help speed up the closure proceedings of underperforming stores. Additionally, it would help ”significantly reduce the company’s debt” in order to “resolve litigation claims in an equitable manner.”

Unlike its competitors CVS and Walgreens, Rite Aid has not pivoted into other avenues to generate revenue. CVS and Walgreens have both aggressively moved into the healthcare space, opening up clinics and offering other services in order to generate new sources of revenue to pay off their own debt associated with opioid-related lawsuits.

After announcing its plans for bankruptcy, the company’s stock price dropped nearly 17% to $0.64 per share.