Business

(NEW YORK) — One of the nation’s largest drugstore chains has voluntarily initiated the Chapter 11 process for bankruptcy protection.

Rite Aid announced Sunday that the company had reached an agreement with creditors on the terms of its financial restructuring plan that will “increase its financial flexibility” and “significantly reduce” its existing debt.

In addition to billions in debt and slumping sales, Rite Aid has faced over 1,000 federal, state and local lawsuits that claim its pharmacies allegedly filled thousands of illegal prescriptions for painkillers, according to the New York Times. In March, the Justice Department filed a complaint against the company, claiming it filled “unlawful prescriptions for controlled substances” that allegedly had obvious and often multiple red flags, indicating misuse. The company has denied those claims.

In its press release Sunday, the company stated it will “resolve litigation claims in an equitable manner.”

Rite Aid did not immediately respond to ABC News’ request for additional comment.

Rite Aid says it employs more than 6,100 pharmacists and operates over 2,100 retail pharmacy locations across 17 states.

The company said Sunday it had secured a commitment for $3.45 billion in new financing and debt reduction agreements under the court-supervised process which is “expected to provide sufficient liquidity to support the Company throughout this process,” adding that it would also close some underperforming store locations and sell off some assets in order to “reduce the Company’s rent expense” and “strengthen its overall financial performance.”

“The Company is making every effort to ensure customers of impacted stores have access to health services, whether at another Rite Aid or a nearby pharmacy, and will work to transfer prescriptions accordingly so that there is no disruption of services,” the company stated. Rite Aid “will also transfer associates at impacted stores to other Rite Aid locations where possible.”

Rite Aid also announced Jeffrey S. Stein will officially take over for Elizabeth Burr as chief executive officer. He will also serve as chief restructuring officer and a member of the company’s board of directors. Burr is expected to “continue in her role as a Director on the Company’s Board,” Rite Aid said.

“Rite Aid has served customers and communities across our country for more than 60 years, and the important actions we are taking today will enable us to move ahead as a stronger company,” Stein said in a statement. “With the support of our lenders, we look forward to strengthening our financial foundation, advancing our transformation initiatives and accelerating the execution of our turnaround strategy. In doing so, we will be even better able to deliver the healthcare products and services our customers and their families rely on now and into the future.”

 

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(WASHINGTON) — Major housing industry groups voiced “profound concern” in a letter this week urging the Federal Reserve to stop raising interest rates.

The rare public admonishment from top business advocates — including the National Association of Realtors and the National Association of Home Builders — underscores a dramatic slowdown in the housing market due in large part to rising interest rates.

The letter arrives roughly three weeks before the Fed plans to make its latest rate-hike decision.

Mortgage rates have reached their highest level in more than two decades and they have continued to rise. Data released on Thursday showed that mortgage rates increased for the fifth consecutive week, according to Freddie Mac.

“The speed and magnitude of these [mortgage] rate increases, and resulting dislocation in our industry, is painful and unprecedented,” the letter from the housing groups said.

Here’s what to know about why real estate groups called on the Fed to stop raising rates:

What’s happening in the housing market?

Sky-high mortgage rates have dramatically slowed the housing market, since homebuyers have balked at stiff borrowing costs and home sellers have opted to stay on mortgages that lock them into relatively low rates.

Mortgage applications have fallen to their lowest level since 1996, the Mortgage Brokers Association said earlier this month.

Sales of previously owned homes, meanwhile, have plummeted more than 15% compared to a year ago, the National Association of Realtors found in August.

The slowdown has coincided with a sharp rise in costs for potential homebuyers.

The average interest rate for a 30-year fixed mortgage has climbed to nearly 7.6%, Freddie Mac data shows.

When the Fed initiated the rise of bond yields with its first rate hike of the current series in March 2022, the average 30-year fixed mortgage stood at just 4.45%.

Each percentage point increase in a mortgage rate can add thousands or tens of thousands in additional costs each year, depending on the price of the house, according to Rocket Mortgage.

What role is the Federal Reserve playing in the housing market slowdown?

An aggressive series of interest rate hikes at the Federal Reserve since last year has pushed up the 10-year Treasury yield, which loosely tracks with long-term mortgage rates.

The Fed has fought elevated inflation with borrowing cost increases as it tries to slash price hikes by slowing the economy and choking off demand.

While inflation has fallen significantly from a peak of about 9% last summer, price increases remain more than a percentage point higher than the Fed’s inflation target.

Price increases held steady in September, fresh data on Thursday showed, suggesting that elevated inflation remains resistant to the interest rate hikes.

The persistence of elevated inflation has prompted the Fed to espouse a policy of holding interest rates at high levels for a prolonged period, which in turn has increased the 10-year Treasury yield and put upward pressure on mortgage rates.

Moreover, the Fed expects to raise rates one more time this year, according to projections released last month.

Speaking at a press conference in Washington, D.C., last month, Fed Chair Jerome Powell acknowledged the continued effect of interest rates on mortgages, noting that activity in the housing market “remains well below levels of a year ago, largely reflecting higher mortgage rates.”

What do the housing industry groups want the Fed to do?

Housing industry advocates want the Fed to take swift actions that reassure investors and other market participants of an end to the policies cooling the industry.

Most notably, the industry groups want the central bank to release a statement saying that it has abandoned consideration of additional rate hikes.

In their letter to Fed officials, the housing groups cautioned that a further slowdown in real estate could help tip the U.S. economy into a recession, scuttling the central bank’s effort to achieve a “soft landing.”

“We urge the Fed to take these simple steps to ensure that this sector does not precipitate the hard landing the Fed has tried so hard to avoid,” the letter said.

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(NEW YORK) — Variety discount store Family Dollar recently initiated multiple recalls on products ranging from over-the-counter drugs to toothpaste sold at regional chains in nearly two dozen states.

The company first issued an announcement Oct. 5, which was published Oct. 10 by the U.S. Food and Drug Administration, alerting Family Dollar shoppers of a voluntary recall on “over-the-counter drugs and medical devices” that had been “stored outside of labeled temperature requirements by Family Dollar and inadvertently shipped” to some of its stores from June 1 through Sept. 21, 2023.

The wide range of recalled items includes cold medicine, pain relievers, mouthwash, moisturizer, vitamins and more. Affected products were sold in 23 states from June 1 through Oct. 4, 2023.

“To date, Family Dollar has not received any consumer complaints or reports of illness related to this voluntary recall,” the company statement read. “This recall is being conducted out of an abundance of caution.”

Family Dollar did not immediately respond to ABC News’ request for comment.

Click here to see the full list of products included in the recall and SKU information.

“Family Dollar has notified its affected stores asking them to check their stock immediately and to quarantine and discontinue the sale of any affected product,” the company statement continued.

Customers who purchased any of the recalled items are able to return them to the purchase location without a receipt for a refund.

Family Dollar recalls multiple over-the-counter products from toothpaste to deodorant
A full list of recalled items, as well as the states impacted, can be found on the FDA’s website.

Family Dollar experienced a similar issue earlier this spring when it voluntarily recalled seven Advil products that it said were also stored at the wrong temperature.
 

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(NEW YORK) — Israel’s government is mobilizing 360,000 reservists as the nation responds to the sudden attack by Palestinian militants.

Global companies with a presence in Israel are moving quickly to safeguard their employees and come up with contingency plans if needed. Bank of America, for example, has decided to temporarily close its offices in Tel Aviv, while other banks including JPMorgan Chase and Goldman Sachs have instructed their employees in Israel to work from home. The computer chip giant Nvidia has canceled this month’s AI Summit in Tel Aviv.

The businesses feeling the brunt of the war’s impact are Israeli tech startups, where many young executives and employees are joining the fight.

That could be a potential blow to the country’s tech sector, which accounts for about one-fifth of the Israeli economy.

Omer Keilaf, CEO and co-founder of Innoviz Technologies, said business is continuing at his Israeli-based company that makes LiDar sensors and software for industries including the auto sector.

“Almost half of the team is still working in the office. The other half is continuing from home,” Keilaf told ABC News.

While he declined to give a specific number, he said “many” of his 500 employees have been called up to fight in the war.

It’s estimated that most Israeli startups are seeing 10% to 30% of their workforces mobilized in the war, according to Avi Eyal, co-founder and managing partner of global venture firm Entrée Capital.

“Israel is resilient and so are its startups,” Eyal told ABC News. “Startups are both maintaining their businesses and have been contributing tremendously to the war effort. The outpouring of support is unlike anything I have ever seen.”

Keilaf and his team at Innoviz Technologies are donating bullet proof vests and other equipment to help keep their employees safe on the front lines.

“The guys that are drafted are actually reporting high morale, which makes me very happy to hear. It helps me to bring up my morale because it’s important that they feel safe,” said Keilaf.

His company remains in constant contact with his employees.

“I ask all of the team leaders to talk at least once a day on the phone, not texting, with one of their team members to hear their voice, to understand what’s going on, and to see if they need any help,” he said. “I think we’ll manage. We are probably the most resilient country in the world, so I’m not worried.”

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(NEW YORK) — Birkenstock took a big step forward on Wall Street this week, taking the nearly 250-year-old German shoe and sandal maker public.

The footwear, often seen as a counter culture shoe for hippies, and in more recent years influencers, has become must-have footwear for many people, but Birkenstock’s Initial Public Offering, or IPO, which was originally priced at $46 per share, didn’t attract the dress shoe-wearing stock brokers on Wednesday.

Shares opened at $41, near the lower end of its expected range of $44 to $49 set a week prior, as Birkenstock CEO Oliver Reichert rang the opening bell in a room surrounded by traders sporting the opened-toed footwear and others waving the sandals in the air.

Birkenstock Holding Ltd. sold nearly 10.8 million shares in the offering, which raised about $495 million on the day. Its shareholders sold an additional 21.5 million shares, according to the Associated Press.

“Through the strong reputation and universal appeal of our brand — enabling extensive word-of-mouth exposure and outsized earned media value — we have efficiently built a growing global fanbase of millions of consumers that uniquely transcends geography, gender, age and income,” Birkenstock said in a recent regulatory filing with the Securities and Exchange Commission, according to the AP.

What started out in 1774 as a somewhat frumpy, but functional arch support sandal has transformed into a cult fashion item and billion dollar business, bolstered with support from the recent blockbuster hit “Barbie” when Margot Robbie’s character is forced to choose between high heels or the strappy suede footwear.

In tandem with the opening on Wall Street, Birkenstock hosted three consumer activations in public parks throughout Manhattan and Brooklyn.

To highlight New York as “the city that never stops walking,” the brand created what it dubbed “Birkenfields” for a public sensory experience that explored the brand’s nearly 250-year heritage and expertise in foot health.

The global brand is deeply rooted in foot health maintenance as well as a family tradition of shoemaking: Its inventor sought to provide function, quality and tradition as Birkenstock’s core values.

Over 95% of Birkenstock products are assembled in Germany with more than 90% of their materials and components sourced from Europe, ensuring the brand meets “the highest environmental and social standards in the industry by operating state-of-the-art scientific laboratories for materials testing,” according to a company press release.

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(NEW YORK) — Consumer prices rose 3.7% in September compared to a year ago, holding steady from the previous month and running hotter than economists had expected.

While inflation has fallen significantly from a peak of about 9% last summer, price increases remain more than a percentage point higher than the Fed’s inflation target.

The data arrives roughly three weeks before the Fed plans to make its latest rate-hike decision. Last month, the Fed left its benchmark interest rate unchanged, noting that it expects to raise rates one more time this year.

Mixed signals from the economy in recent weeks have complicated the Fed’s effort to bring down inflation while averting a recession, an outcome known as a “soft landing.”

A rapid rise in U.S. government bond yields over recent weeks has elevated borrowing costs for consumers seeking mortgage loans and corporations pursuing funds to expand their business. The jump in borrowing expenses threatens to slow economic activity in the coming months.

However, a blockbuster jobs report on Friday showed that employers added 336,000 jobs in September, exceeding economist expectations by nearly twofold and reversing a monthslong hiring slowdown.

The unemployment rate held steady at 3.8%, a historically low figure, government data showed.

The robust hiring suggests that businesses remain willing to add workers, despite an aggressive series of interest rate hikes over the past year.

The good economic news may pose a difficulty for the Federal Reserve, however, as it tries to cool the economy and slow down price increases.

While the breakneck hiring could alarm central bankers, a simultaneous moderation of wage growth shown by the hiring data could alleviate fears of upward pressure placed on prices in the event of a sharp rise in worker pay.

Wages increased 4.2% on an annual basis last month, exceeding the inflation rate but falling well below the 6% pace recorded in March, data showed.

Despite significant progress over the past year, the Fed remains far from its target inflation rate, Fed Chair Jerome Powell said at a press conference in Washington, D.C., last month.

“The process of getting inflation sustainably down to 2% has a long way to go,” Powell said.

“Given how far we have come, we’re in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks,” Powell added.

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(NEW YORK) — Inflation data to be released on Thursday will show whether price increases cooled or accelerated in September, offering the latest snapshot of expenses faced by U.S. households as the Federal Reserve readies to decide another rate hike next month.

Economists expect consumer prices to have increased 3.6% over the year ending in September.

That finding would mark a slight slowdown from the annual inflation rate recorded the previous month but would remain more than a percentage point higher than the Fed’s inflation target.

The data arrives roughly three weeks before the Fed plans to make its latest rate-hike decision. Last month, the Fed left its benchmark interest rate unchanged, noting that it expects to raise rates one more time this year.

Mixed signals from the economy in recent weeks have complicated the Fed’s effort to bring down inflation while averting a recession, an outcome known as a “soft landing.”

A rapid rise in U.S. government bond yields over recent weeks has elevated borrowing costs for consumers seeking mortgage loans and corporations pursuing funds to expand their business. The jump in borrowing expenses threatens to slow economic activity in the coming months.

However, a blockbuster jobs report on Friday showed that employers added 336,000 jobs in September, exceeding economist expectations by nearly twofold and reversing a monthslong hiring slowdown.

The unemployment rate held steady at 3.8%, a historically low figure, government data showed.

The robust hiring suggests that businesses remain willing to add workers, despite an aggressive series of interest rate hikes over the past year.

The good economic news may pose a difficulty for the Federal Reserve, however, as it tries to cool the economy and slow down price increases.

While the breakneck hiring could alarm central bankers, a simultaneous moderation of wage growth shown by the data on Friday could alleviate fears of upward pressure placed on prices in the event of a sharp rise in worker pay.

Wages increased 4.2% on an annual basis last month, exceeding the inflation rate but falling well below the 6% pace recorded in March, data showed.

Inflation stands well below a peak of about 9% last summer, but the Fed remains far from its target rate, Fed Chair Jerome Powell said at a press conference in Washington, D.C., last month.

“The process of getting inflation sustainably down to 2% has a long way to go,” Powell said.

“Given how far we have come, we’re in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks,” Powell added.

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(NEW YORK) — FTX founder Sam Bankman-Fried believed in utilitarianism and thought rules against lying or stealing inhibited his ability to maximize the greatest benefit for the most people, his former girlfriend and co-worker testified Wednesday at his federal fraud trial.

“He didn’t think rules like ‘don’t lie’ or ‘don’t steal’ fit into that framework,” Caroline Ellison, Bankman-Fried’s on-again, off-again girlfriend, said.

She said Bankman-Fried’s belief caused her to accept behavior she recognized as wrong.

“I think it made me more willing to do things like lie or steal over time. When I started working at Alameda, I don’t think I would have believed if you told me I would be sending false balance sheets or taking customer money,” Ellison, who served as CEO of Alameda Research, said. “Over time it became something I was more comfortable with.”

Bankman-Fried faces seven counts of fraud, conspiracy and money laundering centered on his alleged use of customer deposits on the crypto trading platform FTX to cover losses at his hedge fund, Alameda Research, and to buy lavish real estate, among other personal expenses.

On the witness stand for a second day Wednesday, Ellison walked the jury through Alameda balance sheets which, by October 2022, showed Bankman-Fried’s private hedge fund owed FTX customers nearly $14 billion.

“We had a lot of risk on and we owed a lot of money to FTX customers,” Ellison said. “We had no way to repay it.”

She said Bankman-Fried thought about trying to raise money from Mohammed bin Salman, the Saudi crown prince, or by selling shares in FTX, which would collapse in bankruptcy the following month, in November 2022.

“I was in a state of dread. I was thinking, worrying, imagining every day what would happen if people tried to withdraw too much money at one time,” she said. “I was imagining all the FTX customers who we worked with who would get hurt by this.”

To shore up Alameda’s precarious financial position Bankman-Fried told Ellison to repay Alameda’s loans with money it borrowed surreptitiously from FTX customers, she testified Wednesday.

“He directed me to continue repaying Alameda’s loans,” Ellison said.

“How?” prosecutor Danielle Sassoon asked.

“By taking money from FTX customer funds,” she replied.

When Sassoon asked her if she knew it was wrong, Ellison replied, “Yeah I thought it was wrong,” but continued to do it because “Sam told me to.”

By that point, Alameda had taken about $10 billion from FTX and Ellison said she worried its lender, Genesis, would find out.
“We had been borrowing increasing amounts of money from FTX customers and I didn’t want Genesis to know that,” Ellison said. “I didn’t want Genesis or others to know that Alameda was borrowing a lot of money from FTX.”

Ellison said Bankman-Fried cautioned her against putting anything in writing, once telling her, “Anything we put on Slack should be something we’re comfortable seeing in The New York Times.”

Ellison also described a “large bribe to Chinese government officials to get some of our trading accounts unlocked.” Alameda had two trading accounts worth about a billion dollars on exchanges based in China, which were both frozen in 2021 as part of a Chinese government investigation into money laundering.

It was a substantial amount of Alameda’s trading capital at the time and Ellison accused Bankman-Fried of saying “that we should send the cryptocurrency transfers” equaling about $100 million.

 

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(NEW YORK) — Mortgage rates stand at their highest level in more than two decades. The average rate for credit card holders tops anything on record at the Federal Reserve. Car loans have returned to 2008 levels, car research group Edmunds found.

Pain-inducing interest rates for just about any loan, experts said, trace to an underlying trend: Rapidly rising U.S. government bond yields.

The yield on a 10-year Treasury bond, or the amount paid to a bondholder annually, stands at about 4.6%, marking nearly a percentage-point jump since June.

“Everything is built up from the Treasury bond yields,” Marti Subrahmanyam, a professor of finance and business at New York University, told ABC News.

Here’s what to know about rising bond yields and what they mean for the finances of average Americans:

Why have bond yields risen so rapidly?

Soaring U.S. government bond yields stem from elevated inflation and the Fed’s ongoing effort to fight it, experts told ABC News.

Since last year, the Fed has put forward an aggressive series of interest rate hikes as it tries to slash price increases by slowing the economy and choking off demand.

A rise in the Fed’s benchmark interest rate closely tracks with increases in short-term Treasury bond yields, which in turn influence yields for long-term Treasury bonds, such as the 10-year Treasury, Jim Bianco, a market analyst at Bianco Research, told ABC News.

“When the Fed raises its rates, other rates move up,” Bianco said.

However, the rate hikes at the Fed — which stretch back to last March — fail to account for the meteoric rise of Treasury bond yields in recent months.

The recent jump in bond yields owes in large part to an acknowledgement among traders that the inflation fight has proven difficult and could force the Fed to keep its benchmark rate elevated for longer than expected, experts said.

Inflation stands well below its peak last year of over 9% but remains more than a percentage point higher than the Federal Reserve’s target rate.

“This more aggressive move in bond yields has coincided with a realization and grudging acceptance that the Fed is going to be keeping interest rates higher for longer and won’t be cutting them anytime soon,” Edward Marrinan, a credit analyst at SMBC Nikko Securities America, told ABC News.

What do high bond yields mean for personal finances?

High bond yields have made borrowing much more expensive for U.S. consumers.

The onset of this financial pain is exemplified by the housing market, where the average interest rate for a 30-year fixed mortgage is about 7.5%, Freddie Mac data shows.

When the Fed initiated the rise of bond yields with its first rate hike of the current series in March 2022, the average 30-year fixed mortgage stood at just 4.45%.

Each percentage point increase in a mortgage rate can add thousands or tens of thousands in additional costs each year, depending on the price of the house, according to Rocket Mortgage.
MORE: Interest rates are at a 22-year high. Here’s what that means for your finances.

“For most people, the biggest loan that they need to take out is a mortgage,” Bianco said. “Mortgage rates are going up and monthly payments are becoming more expensive.”

That holds true for borrowing rates tied to a wide range of other loans, including those for higher education, cars and credit cards, among others.

The impact of bond yields for consumers isn’t entirely negative, however. The trend has increased returns for investors who place their money in financial instruments such as money market funds or high-interest savings accounts, which are typically safer investments than the stock market.

“A lot of people are very happy that they can get a yield again,” Bianco said.

 

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(WASHINGTON) — The Federal Trade Commission is proposing a new rule that seeks to eliminate junk fees — those hidden costs that can unexpectedly push up prices consumers pay at checkout.

The proposed rule would apply to many industries across the economy, including event tickets, hotels and apartment rentals. If the rule goes into effect, companies that continue to charge these fees could be fined and forced to pay back consumers.

The FTC says the far-reaching rule could save consumers “tens of billions of dollars in fees.”

“The proposed rule would prohibit corporations from running up the bills with hidden and bogus fees, requiring honest pricing and spurring firms to compete on honesty rather than deception,” FTC Chair Lina Khan said on a call with reporters.

The FTC estimates the proposed rule will save consumers more than 50 million hours per year of wasted time spent searching for the total price in live ticketing and short-term lodging alone. This time savings is equivalent to more than $10 billion over the next decade.

There will be a 60-day public comment period once the rule is published in the Federal Register.

Senior administration officials, however, did not have guidance on when the rule could be finalized and go into effect.

The FTC has the authority to move forward with this rule without additional approval from Congress, officials said.

As President Joe Biden continues his push of “Bidenomics” and focuses on the everyday costs that hit American pocketbooks, this is another chance for the president to try to appeal to voters about his economic message. He’s repeatedly highlighted his administration’s efforts to tackle these junk fees across a number of sectors — from air travel to health care.

Separately, the Consumer Financial Protection Bureau is issuing guidance to large banks and credit unions, prohibiting them from charging customers fees for basic information about their accounts, like checking their bank account balance.

The CFPB also released a new report showing its crackdown on bounced check fees has saved consumers nearly $2 billion since 2021.

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