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Purdue Pharma readies vote process for proposed restructuring deal

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Bottles of prescription painkiller OxyContin, 40mg pills, made by Purdue Pharma L.D. sit on a shelf at a local pharmacy, in Provo, Utah, U.S., April 25, 2017. REUTERS/George Frey/File Photo

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  • Trial over plan scheduled for August
  • Many states remain opposed to opioid deal
  • Judge invokes Scrooge McDuck in explaining Sackler wealth

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(Reuters) - Purdue Pharma LP is on track to begin soliciting creditor votes for its proposed reorganization plan soon, putting the OxyContin maker on a path toward a hearing over the plan this summer.

During a virtual hearing on Wednesday, U.S. Bankruptcy Judge Robert Drain in White Plains, New York indicated that he would be ready to approve, following minor modifications, disclosure materials that will be sent to creditors to inform their votes. Purdue, represented by Davis Polk & Wardwell, is hoping to wrap up its Chapter 11 later this year through a restructuring that steers funds toward opioid abatement programs.

Purdue filed for bankruptcy protection in September 2019 to resolve nearly 3,000 lawsuits by states, local governments and private individuals accusing it of fueling the national opioid crisis through deceptive marketing of its products. The reorganization plan rests on a proposed settlement that Purdue says is worth more than $10 billion.

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The deal still faces opposition from about 24 U.S. states that are seeking more from Purdue and the members of the wealthy Sackler family that own the company, who have said they will contribute $4.275 billion to the settlement in exchange for protection against opioid-related litigation. During Wednesday’s hearing, a lawyer for those states, Andrew Troop of Pillsbury Winthrop Shaw Pittman, argued that the disclosure materials should include more information about the Sackler family members’ combined worth. Congress estimated that figure to be $11 billion earlier this year.

Drain was wary of that request though, saying that any total dollar amount without additional context would be misleading because the Sacklers’ money and assets are varied and located in different places.

"It’s not like Scrooge McDuck, who takes a bath in vaults of cash he has in his apartment,” the judge said.

"There's not one Scrooge McDuck, there are a lot of them," he added.

In response, Marshall Huebner of Davis Polk said Purdue would add more information to the disclosures about how the Sacklers' wealth was taken into account in reaching the deal.

The proposed reorganization plan sets up trusts that would indirectly control a newly formed entity to distribute money to states, local governments and tribal organizations for opioid abatement programs. The Sackler contributions would be paid out over nine years.

The plan also establishes trusts to pay out claims to private entities and individuals that have brought opioid-related lawsuits against Purdue, such as hospitals, insurance carriers and legal guardians of children born with addiction-related issues.

Purdue’s unsecured creditors’ committee, represented by Akin Gump Strauss Hauer & Feld, is not yet fully on board with the plan and settlement, saying issues remain over the Sackler family member settlement and the allocation of value among opioid claimants and other creditors. However, committee lawyer Arik Preis said on Wednesday said it is working toward a resolution with the company.

The judge rejected objections to the disclosures that he said are issues with the plan itself, saying those will be taken up when he considers the substance of the plan in August, after the votes are collected. In the meantime, Purdue’s lawyers are continuing negotiations with states and creditors that remain opposed to the deal.

A hearing on the plan is set for Aug. 9 before Drain and will continue as long as needed, according to court papers.

The case is In re Purdue Pharma LP, U.S. Bankruptcy Court, Southern District of New York, No. 19-bk-23649.

For Purdue: Marshall Huebner, Benjamin Kaminetzky, Timothy Graulich, Eli Vonnegut and James McClammy of Davis Polk & Wardwell

For the non-consenting states: Andrew Troop and Andrew Alfano of Pillsbury Winthrop Shaw Pittman

Read more:

Purdue Pharma to use public trusts, Sackler cash to settle opioid litigation

Sacklers boost opioid settlement offer to $4.3 billion -sources

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Our Standards: The Thomson Reuters Trust Principles.

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

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