Mallinckrodt wins bankruptcy plan approval

April 2022 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

April 2022 Issue

Bringing its 16-month bankruptcy odyssey close to an end, American-Irish pharmaceutical company Mallinckrodt plc has won court approval of its bankruptcy exit plan, paving the way for the company to begin the next stage of its restructuring process.

Confirmed by the US Bankruptcy Court for the District of Delaware, the exit plan, alongside a previously announced restructuring support agreement (RSA), will significantly improve Mallinckrodt’s financial position and resolve numerous lawsuits the company was facing prior to Chapter 11 proceedings.

The exit plan, as contemplated by the RSA, includes key legal settlements that resolve opioid claims brought against the company and litigation matters involving Acthar Gel, among other claims, and provides for the partial equitisation of Mallinckrodt’s guaranteed unsecured notes. The exit plan strengthens the company’s balance sheet and reduces its total debt by approximately $1.3bn.

Moreover, the exit plan and RSA will also enable Mallinckrodt to move forward as a better capitalised company, with material historical litigation resolved, and a renewed focus on its strategic priorities of developing and commercialising therapies that improve health outcomes.

The exit plan has been broadly supported by key financial, legal and other stakeholders, including 50 states and territories and the plaintiffs’ executive committee in the opioid multidistrict litigation, the multi-state governmental entities group, which represents more than 1300 counties, municipalities, tribes and other governmental entities across 38 states and territories with opioid-related litigation against Mallinckrodt, as well as certain trade creditors.

“We are pleased to have achieved this significant milestone in the company’s reorganisation,” said Mark Trudeau, president and chief executive of Mallinckrodt. “We appreciate the broad consensus reached with key stakeholder groups for the reorganisation plan and their confidence in Mallinckrodt and our path forward.”

A global business consisting of multiple wholly owned subsidiaries, Mallinckrodt develops, manufactures, markets and distributes innovative treatments for underserved patient populations within neurology, rheumatology, nephrology, pulmonology and ophthalmology. The company’s expertise also extends into acute and critical care hospital products, as well as its broad portfolio of generic prescription medicines and active pharmaceutical ingredients.

“I would like to extend my sincere gratitude to the Mallinckrodt team for their unwavering patience, focus and resilience throughout this process,” continued Mr Trudeau. “We also appreciate the strong support of our customers, partners and other stakeholders. All of us at Mallinckrodt remain as committed as ever to developing new therapies, improving patient health outcomes and supporting underserved patients with severe and critical conditions.”

Furthermore, the directors of Mallinckrodt intend to make certain filings to commence examinership proceedings in Ireland, which are required to implement certain Irish law aspects of the reorganisation and allow for emergence.

Mallinckrodt expects to formally emerge from Chapter 11 in the first half of 2022, following the completion of the examinership proceedings, which is expected to take approximately 100 days.

Until that time, the company remains under the US bankruptcy court’s jurisdiction.

Serving as counsel for Mallinckrodt are Latham & Watkins LLP, Wachtell, Lipton, Rosen & Katz, Arnold & Porter, Ropes & Gray LLP and Hogan Lovells. Guggenheim Securities, LLC is serving as investment banker and AlixPartners LLP is serving as restructuring adviser.

Mr Trudeau concluded: “We have made important progress and are now turning to the final phases in a reorganisation process designed to reduce debt, address litigation claims and position the company for long-term success.”

Fraser Tennant