RDS files Chapter 11

Drug Store News, Dec 9, 1991 by David Vaczek

RDS files Chapter 11

PHOENIX - RDS Acquisition Corp., owner of RxPlus Drugs, has filed for Chapter 11 protection, and Al Towle, president and ceo, has resigned, the company said.

The Nov. 25 filing in Federal Bankruptcy Court in Phoenix covers 131 drug stores under the RxPlus and Revco Drug names in Arizona, New Mexico, Texas and Colorado. It doesn't include SRX Acquisition Corp., a separate company that RxPlus management formed to buy and operate 17 former SupeRx stores in Arizona.

The petition seeks to convert to Chapter 11 a petition for involuntary Chapter 7 filed in late October by three of RDS's vendors, who claim they're owned $150,100 between them. RDS was more than 90 days late in paying them, the company admitted.

Towle's resignation was then announced on Nov. 21 by RDS Acquisition Corp's. board of directors. He is replaced as president and ceo by Robert Oberfield, who had been senior vp-operations and administration.

"We took this necessary step (the Chapter 11 filing) in the best interest of our customers, our associates, and our vendors. The stores are open, our pharmacists continue to be prepared to fill our customers' prescription needs," said Oberfield, adding that the court-protected restructure will result in a healthier company.

Robert Morick, senior vp-marketing, told Drug Store News that Citicorp Venture Capital, a unit of Citicorp bank, Towle and Oberfield are the three largest equity owners.

The filing ends the first act of a chain that was formed through the Sept. 1990 purchase of 146 stores which were being divested by Revco, another operator in Chapter 11. A month later, the group acquired 17 stores from the bankrupt SupeRx Corp. of Arizona for about $4.5 million.

RxPlus is the largest drug chain headquartered in the Southwest, with estimated first year revenues of $250 million-plus.

Morick last week said that the company has been "struggling," although sales and profits have been "somewhat" according to projections, he said. "We didn't have enough financing to run it the way we wanted to run it. We needed more working capital."

Management had been negotiating since the summer with Citicorp and Security Pacific Bank to raise new financing when the Chapter 7 petition was filed by the three creditors and "threw (the banks) into a tizzy," said Morick.

Other company officials including Towle could not be reached for comment.

RxPlus was launched on a buoyant note by a team of veteran drug store operatives who felt they had purchased Southwestern drug stores that had solid potential.

The Revco stores were said to be in good condition when purchased and boasted a strong presence in markets including El Paso and Tucson. And although in a competitive market, the SupeRx stores came with excellent locations and leases.