Mallinckrodt, with key settlement in hand, races to push through new reorg plan

Bottles of prescription painkillers Hydrocodine Bitartrate and Acetaminopohen, 5mg/325mg pills, made by Mallinckrodt sit on a shelf at a local pharmacy, in Provo, Utah. REUTERS/George Frey
  • Drugmaker to file amended restructuring plan in coming days
  • Recent deal captures key creditor, opioid claimant support

(Reuters) - Mallinckrodt Plc is hurrying to formalize its recent settlement with key groups of creditors and opioid claimants in the next few days as it aims to exit bankruptcy by the end of the year, a lawyer for the drugmaker said at a virtual hearing in Delaware bankruptcy court on Wednesday.

Anupama Yerramalli of Latham & Watkins, said during a virtual hearing that her team is aiming to file an amended reorganization plan by the end of the week as well as a proposed revised schedule for a bankruptcy court hearing to approve the plan.

“There’s a fair amount of work the parties are going to have to do over the next couple of days,” Yerramalli said.

Mallinckrodt filed for bankruptcy in Delaware in October 2020 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 reduce its overall debt by $1.3 billion and set up a trust for opioid claimants that is now worth approximately $1.7 billion.

The proposal faced opposition from several groups, including the company's official committee of unsecured creditors, its official opioid-related claimants’ committee and second-lien noteholders, until a deal was announced on Sept. 3. The settlement sets up a trust funded with $135 million in cash for holders of general unsecured claims, which include AmerisourceBergen Corp and CVS Pharmacy Inc, and would be entitled to additional payouts under certain conditions.

The deal also adds $125 million to a separate trust for opioid claimants that will be paid eight years after the plan goes into effect. That amount will be added to the $1.6 billion the trust was already slated to receive.

The company also resolved as part of the settlement a dispute with second-lien noteholders who said they were entitled to certain premiums for early paydowns of their debt.

A hearing on the plan is currently set for Sept. 21 before U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware.

Despite making peace with most of its major creditor groups, Mallinckrodt still faces some opposition to the plan. The U.S. Securities and Exchange Commission has taken issue with the format of its proposed release of third-party litigation claims, which were recently a topic of hot debate in the Purdue Pharma LP bankruptcy. Additionally, Mallinckrodt faces lingering disputes with plaintiffs pursuing antitrust claims related to the company's Acthar gel product outside of the bankruptcy court. A group of plaintiffs have asked Dorsey for permission to resume parts of that litigation.

The company’s next hearing before Dorsey is set for Sept. 14.

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, Jeff 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

Read more:

Mallinckrodt bankruptcy judge approves kickoff of voting process

Mallinckrodt opioid claimants call for more reorg plan disclosures

Mallinckrodt builds restructuring support with lender deal

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Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.