Mallinckrodt: Court denies motion to form official equity committee

By Sarah Lizee

Olympia, Wash., Jan. 13 – The bankruptcy court overseeing Mallinckrodt plc’s case denied an informal committee’s motion to appoint an official equity committee, according to an order filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, Alexander E. Parker of the Buxton Helmsley Group, whose investors retained a minority interest in Mallinckrodt’s common stock, asked the court to appoint the official equity committee.

Parker said the restructuring plan proposed by management was negotiated “in the worst of faith, with absolutely no attempt or intent to uphold their fiduciary duty to shareholders.”

“The current restructuring plans give no consideration to shareholder interests, despite an immense [approximately] $1.5 billion in shareholders equity.”

Parker said that if creditors can’t agree to current shareholders retaining the roughly $1.5 billion in equity belonging to them, the only other fair resolution is to liquidate the company.

“At present, creditors have representation for their interests, when equity holders have none, leaving the scale of representation far out of balance and this case on course for an extremely disastrous outcome that will result in losses for many, many retirement accounts – people who should not be the victims of a corrupt management’s actions,” he added.

The official committee of unsecured creditors later objected to the group’s motion.

“Given that claims against the debtors include billions of dollars of funded debt and untold amounts of litigation-related liabilities involving both the Specialty Generics and Specialty Brands businesses, there is no scenario in which the value of the debtors’ assets minus their liabilities would provide equity holders with a recovery in these cases,” the creditors committee said.

“Therefore, the extraordinary relief of appointing an equity committee in these cases – where there are already two official committees – is unwarranted under the circumstances, particularly given the efforts by both the [official committee of unsecured creditors] and [official committee of opioid-related claimants], as well as by the debtors, to preserve and maximize value.”

Dublin-based Mallinckrodt develops, manufactures, markets and distributes specialty pharmaceutical products and therapies. The company filed Chapter 11 bankruptcy on Oct. 12 under case number 20-12522.

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