Mallinckrodt Moves Ahead With Plan to Hand Company to Creditors

Opioid maker Mallinckrodt Plc filed a plan of reorganization Tuesday that has the support of opioid litigation claimants, holders of 84% in principal amount of unsecured notes and an undisclosed portion of term loan holders, according to court filings.

The plan provides for the company’s revolving credit facility to be paid in full in cash. First- and second-lien term lenders would either be repaid in cash or with new takeback term loans plus cash for accrued interest and other payments, depending on the allowance of each group’s make-whole claims at the time of confirmation.

Unsecured noteholders would receive a pro rata share of the takeback second-lien notes and equity shares in the reorganized company. The disclosure statement stipulates that the ad hoc group of unsecured noteholders hasn’t yet approved the language allocating takeback loans to the first- and second-lien holders.

Opioid litigation claims would be channeled into a trust set aside for their settlement and payment. The company has previously said it would total $1.6 billion in structured payments. Mallinckrodt was the third major opioid maker to go under after being swamped by lawsuits alleging it profited by fueling the U.S. opioid epidemic.

Mallinckrodt entered Chapter 11 in October after getting creditors and claimants to agree on a broad restructuring plan that would hand ownership to bondholders, wipe out shareholders and resolve all opioid litigation. It had targeted a March deadline for filing its official plan after winning a February motion to bar creditors from filing competing proposals for an additional six months.

The bankruptcy came as Mallinckrodt was preparing for two trials over accusations it illegally marketed opioids and failed to properly oversee large shipments of the highly addictive pills, which have been tied to an epidemic of abuse that killed thousands of Americans.

A hearing to consider approval of the disclosure statement has been set for May 26.

The case is Mallinckrodt Plc, 20-12522, U.S. Bankruptcy Court for the District of Delaware (Wilmington). To view the docket on Bloomberg Law, click here

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