AlixPartners is serving as restructuring advisor to Mallinckrodt, which initiated Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware to modify its capital structure, including restructuring portions of its debt.
The proposed capital structure modifications would reduce total debt by approximately $1.3 billion and achieves a broadly supported global settlement that would resolve opioid-related claims against the company and its subsidiaries.
The restructuring support agreement with guaranteed unsecured noteholders and certain governmental opioid plaintiffs, including 50 states and territories, and a court-appointed plaintiff’s executive committee represents the interests of thousands of opioid plaintiffs.
The entities that filed Chapter 11 petitions include Mallinckrodt, substantially all of its U.S. subsidiaries, including its specialty generics-focused subsidiaries and specialty brands-related subsidiaries, and certain of its international subsidiaries.
Mallinckrodt intends to use the Chapter 11 process to provide a fair, orderly, efficient and legally binding mechanism to implement a restructuring support agreement that, among other things, provides for an amended proposed opioid claims settlement and a financial restructuring that would:
- Reduce the company’s total debt by approximately $1.3 billion, improving the company’s financial position and better positioning it for long-term growth
- Resolve opioid-related claims against the company, its subsidiaries and related entities
- Resolve various Acthar Gel-related matters, including the CMS Medicaid rebate dispute, an associated False Claims Act lawsuit and an FCA lawsuit relating to Acthar’s previous owner’s interactions with an independent charitable foundation
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“After many months of deliberation, negotiation and consideration of alternatives, Mallinckrodt’s management and board of directors determined that implementing a Chapter 11 restructuring provides the best opportunity to maximize the value of the enterprise and position the company for the future in light of the current challenges it faces. The actions we are taking are an important step forward for Mallinckrodt and our patients, employees, customers, suppliers and other partners. We have worked diligently over the last several months to evaluate all available options to achieve a comprehensive resolution to the significant litigation and debt issues overhanging our business. Having entered our restructuring support agreement and reached agreements in principle with a key group of opioid plaintiffs, other governmental parties and our guaranteed unsecured noteholders, we are beginning this process in a highly organized manner. We are now on a clear path to eliminating legal uncertainties, maximizing enterprise value, strengthening our balance sheet and moving ahead with our strategic plans. At the same time, we remain committed to improving health outcomes and developing and bringing to market therapies for patients with severe and critical conditions.” Mark Trudeau, president and CEO of Mallinckrodt, said. “We are grateful to our employees for their continued commitment to our customers and the patients we serve. We also thank our suppliers and business partners for their support as we continue working together to improve the lives of patients.”
Overview of Key RSA Terms
In connection with the Chapter 11 filing, the company entered into an RSA that provides for a financial restructuring designed to strengthen the company’s balance sheet and reduce its total debt by approximately $1.3 billion, improving the company’s financial position and allowing the company to continue driving its strategic priorities and investing in the business to develop and commercialize therapies to improve health outcomes.
Parties to the RSA include:
- Holders of approximately 84% of the company’s guaranteed unsecured notes
- 50 states and territories
- The court-appointed plaintiffs’ executive committee representing the interests of thousands of plaintiffs in the opioid multidistrict litigation (Opioid MDL), which have agreed to recommend that the more than 1,000 counties, municipalities (including cities, towns and villages), Native American tribes and other opioid claimants in the Opioid MDL support the RSA
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Under the terms of the RSA, at the end of the court-supervised process:
- All allowed first lien credit agreement claims, first lien note claims and second lien note claims are expected to be reinstated at existing rates and maturities
- Holders of allowed guaranteed unsecured note claims are expected to receive their pro rata share of $375 million of new secured second lien notes due seven years after emergence and 100% of new Mallinckrodt ordinary shares, subject to dilution by the warrants and certain other equity
- Trade creditors and holders of allowed general unsecured claims are expected to share in $150 million in cash
- Equity holders and non-guaranteed unsecured noteholders are expected to receive no recovery
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Advisors
Latham & Watkins, Ropes & Gray and Wachtell, Lipton, Rosen & Katz are serving as counsel, Guggenheim Securities, is serving as investment banker and AlixPartners is serving as restructuring advisor to Mallinckrodt. Hogan Lovells is serving as counsel with respect to the Acthar Gel matter.
Mallinckrodt is a global business consisting of multiple wholly-owned subsidiaries that develop, manufacture, market and distribute specialty pharmaceutical products and therapies.
