Mallinckrodt opioid claimants call for more reorg plan disclosures

(Reuters) - The group representing individuals and government entities with opioid-related claims against Mallinckrodt Plc say the pharmaceutical company needs to provide more information and time for them to determine whether they will vote in support of its proposed restructuring plan.

A virtual hearing on the matter is scheduled for Wednesday before U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware. The official committee of opioid claimants, represented by Akin Gump Strauss Hauer & Feld, on Friday filed objections to Mallinckrodt’s disclosure materials and motion to begin soliciting plan votes.

Mallinckrodt, represented by Latham & Watkins, filed for bankruptcy in October with $5.3 billion in funded debt to resolve widespread litigation brought by states, local governments and private individuals accusing it of deceptively marketing opioids. The company is now pursuing a reorganization plan that would set up a $1.6 billion trust to resolve opioid-related claims.

The plan would put unsecured noteholders in control of the company and eliminate $1.3 billion in debt. General unsecured creditors would split $150 million in cash.

In court papers filed on Friday, the committee took issue with the provisions of the plan that would restrict opioid claimants’ ability to bring future claims against certain parties including current and former officers and directors of the company. At the same time, the committee said, the disclosure materials don’t adequately explain opioid claimants’ recoveries. The committee argued that they need more details beyond the $1.6 billion figure attached to the trust.

Additionally, the committee contends that claimants are not being given enough time or adequate notice of their rights.

“The Debtors’ proposed solicitation timeline – which spans a maximum of 62 days from the Solicitation Deadline to the Voting Deadline – is insufficient to provide the potentially hundreds of thousands of unknown Opioid Claimants with notice of the proposed Plan and a meaningful opportunity to cast an informed vote,” the committee said.

A lawyer for Mallinckrodt, Anupama Yerramalli of Latham, did not immediately respond to a request for comment.

The U.S. departments of Health & Human Services and Veterans Affairs also filed an objection to the disclosure materials, saying Mallinckrodt needs to explain how the opioid trust funds will be allocated. Mallinckrodt’s unsecured creditors’ committee and the U.S. Department of Justice’s bankruptcy watchdog, among others, have filed objections as well. The unsecured creditors' committee and trustee demanded more information about estimated creditor recoveries and challenged the plan's proposed releases for officers and directors.

The plan is supported by most of Mallinckrodt's guaranteed unsecured noteholders, a group of first lien lenders, and more than 1,300 counties, municipalities and other government entities, as well as nearly all U.S. States.

The case is In re Mallinckrodt Plc, U.S. Bankruptcy Court, District of Delaware, No. 20-12522.

For Mallinckrodt: George Davis, George Klidonas, Andrew Sorkin, Anupama Yerramalli, Jeffrey Bjork, Elizabeth Marks of Latham & Watkins; and Mark Collins, Robert Stearn Jr, Michael Merchant, Amanda Steele, Robert Maddox of Richards, Layton & Finger

For the unsecured creditors' committee: Cullen Drescher Speckhart and Cathy Hershcopf of Cooley; and Natalie Ramsey of Robinson & Cole

For the opioid-related claimants' committee: Arik Preis, Mitchell Hurley and Sara Brauner of Akin Gump Strauss Hauer & Feld; and Justin Alberto and Seth Van Aalten of Cole Schotz

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