Mallinckrodt seeks expedited approval for scaled-back Chapter 11 exit financing

REUTERS/George Frey
  • Company will seek approval of $650 million financing on Wednesday
  • Previously expected a $900 million exit loan
  • Mallinckrodt's restructuring plan was approved in February

(Reuters) - Bankrupt pharmaceutical company Mallinckrodt Plc will seek expedited approval to raise $650 million in debt to finance its exit from Chapter 11, replacing a $900 million loan that fell through amid market volatility.

Mallinckrodt's reorganization plan was approved in February in Delaware bankruptcy court, but the company remains in Chapter 11 as it finalizes agreements and works to secure exit funding.

Anupama Yerramalli, an attorney for Mallinckrodt from Latham & Watkins, said in court on Monday that the company will seek approval for the new exit financing on Wednesday. The new exit financing will be funded largely by the company's existing bondholders after the earlier-planned loan failed to generate sufficient market interest from debt investors.

U.S. Bankruptcy Judge John Dorsey said he would consider the request, but would give other parties time to object to the fast-track schedule before Wednesday.

Andrew Rosenberg of Paul, Weiss, Rifkind, Wharton & Garrison, an attorney for bondholders who will provide additional financing, urged the court to move quickly, given the volatile market conditions that disrupted the initial $900 million loan and could still imperil the new financing.

"It remains a very precarious situation," Rosenberg said. "Each additional day puts the company's exit at risk."

Mallinckrodt did not immediately respond to a request for comment on its exit from Chapter 11.

The Ireland-based company makes generic drugs, including opioids, and branded drugs including Acthar Gel, which is used to treat multiple sclerosis and infantile spasms. It filed for Chapter 11 protection in 2020 in the face of opioid-related lawsuits and a court battle over Medicaid rebates for Acthar, its top-selling drug.

The company's reorganization plan includes a $1.7 billion settlement to resolve thousands of lawsuits accusing it of deceptively marketing its opioids. The plan allows Mallinckrodt to reduce $5.3 billion in debt by $1.3 billion and hands control of the reorganized company to creditors.

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

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

For bondholders providing exit financing: Andrew Rosenberg of Paul, Weiss, Rifkind, Wharton & Garrison

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Reporting by Dietrich Knauth

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