Mallinckrodt Bankruptcy Would Hand Control Over to Bondholders
Mallinckrodt Bankruptcy Would Hand Control Over to Bondholders
(Bloomberg) -- Mallinckrodt Plc, the maker of opioids and other drugs, is nearing a deal to hand majority ownership to its unsecured bondholders as part of a bankruptcy filing, according to people with knowledge of the plan.
The bonds would be traded for most of Mallinckrodt’s equity and some new debt, and the debt of higher-ranked lenders would be reinstated or replaced by new securities that fully cover their claims, said the people. They asked not to be named discussing private negotiations.
The lenders and opioid claimants would be included in the agreement, the people said. A representative for Mallinckrodt declined to comment. Debtwire reported earlier on negotiations to give the bondholders equity and new debt. Most of the company’s unsecured debt trades at about a quarter of its original value.
Mallinckrodt would become the third major opioid producer to file for bankruptcy, amid an addiction crisis that kills more than 100 Americans daily. The companies are facing off against thousands of plaintiffs from states, cities and counties that blame drug makers and distributors for the epidemic of overdose deaths.
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Mallinckrodt hired restructuring advisers late last year, Bloomberg reported, and management disclosed in February it was pursuing court protection. The plan at that time was to settle its opioid claims by putting a small part of the company into bankruptcy, but it failed to gain required support from lenders.
The drug maker is also entangled in a dispute with the U.S. Centers for Medicare & Medicaid Services over the pricing of Acthar Gel, its best-selling prescription drug, which is used to treat autoimmune disorders and rare diseases. A trial court ruled that it has to pay more than $600 million in rebates.
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