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Mallinckrodt Initiates Voluntary Prepackaged Chapter 11 Proceedings

August 28, 2023, 07:48 AM
Filed Under: Bankruptcy

Mallinckrodt plc, a global specialty pharmaceutical company, has taken the next step to implement the comprehensive financial restructuring plan contemplated by a Restructuring Support Agreement ("RSA") the Company previously entered into with more than 85% of each of the Company's first and second lien debtholders and the Opioid Master Disbursement Trust II (the "Trust"), as announced on August 23, 2023.

Pursuant to the RSA and with the authorization of the Company's Board of Directors, Mallinckrodt and certain of its subsidiaries  initiated voluntary prepackaged Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware. With the overwhelming support of its key stakeholders, the Company expects to complete the court-supervised process in the fourth quarter of 2023.

Implementing the financial restructuring contemplated by the RSA will reduce the Company's total funded debt by approximately $1.9 billion, increase free cash flow generation, extend maturity runway and better position the business for long-term success. The RSA also provides for, among other consideration, a final, one-time payment of $250 million that was made to the Trust on August 24, 2023. This payment, in addition to the $450 million the Company previously paid, is intended to support the Trust's mission to address the U.S. opioid crisis and fund addiction treatment.

Siggi Olafsson, President and Chief Executive Officer of Mallinckrodt, said, "We are moving forward with the anticipated next steps for our financial restructuring plan and appreciate the significant support of our key stakeholders to reach this milestone. Implementing this agreement will meaningfully enhance Mallinckrodt's financial foundation and better position the business for the future. We expect to complete this process on an expedited basis and emerge as a stronger organization that will continue to help improve outcomes for patients with severe and critical conditions."

Mr. Olafsson continued, "I would like to thank the Mallinckrodt team for their resilience and dedication to our company's mission. We also thank our customers, vendors, suppliers and other partners for their ongoing support as we work together to meet our patients' needs. As we move forward, we are continuing to deliver the important therapies that patients depend on us to provide."

Continuing to Operate as Normal

Mallinckrodt is operating normally, supporting patients with high-quality therapies, serving customers and working with its business partners. Additionally, the Company's Specialty Generics business will continue to operate under the previously agreed upon operating injunction, which provides for enhanced compliance and independent monitoring measures and has been in place since October 2020. The Company also fully intends to continue supporting patient groups and patient advocacy programs, including through its Patient Advocacy Advisory Board and patient assistance programs.

Following Court approval, which the Company expects to receive shortly, Mallinckrodt will have in excess of $450 million of liquidity comprising cash, commitments received for $250 million in new financing from certain of its creditors in connection with the RSA and new borrowing availability from lenders under its asset-based loans. Together with cash generated from ongoing operations, this liquidity is expected to be sufficient to support the Company's continued operations during the court-supervised process.

The Company has filed a number of customary motions seeking Court approval to support its operations during this process, including the continued payment of employee wages, salaries and benefits without interruption. Mallinckrodt expects to receive approval for these requests shortly. The Company intends to pay vendors and suppliers in the ordinary course, including for any pre-petition amounts owed at the time of filing.

In connection with the Chapter 11 filing, Mallinckrodt also intends to make certain filings to commence Examinership Proceedings in Ireland, which are required to implement certain Irish law aspects of the financial restructuring and allow for emergence.

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