Mallinckrodt exits Chapter 11 with $1.3 billion of debt eliminated

By Sarah Lizee

Olympia, Wash., June 16 – Mallinckrodt plc has completed its reorganization process, emerged from Chapter 11 and completed its Irish examinership proceedings, according to a Thursday press release.

Implementing the plan and the scheme reduces the company’s total debt by roughly $1.3 billion and enables it to move forward with more than $250 million in cash and cash equivalents on hand, Mallinckrodt said.

“Today marks a new beginning for Mallinckrodt as we emerge well-positioned for long-term success, with a substantially stronger capital structure and major litigation matters permanently resolved,” commented Paul Bisaro, chairman of the Mallinckrodt board of directors.

New financing

In connection with emergence, Mallinckrodt issued $650 million in new first-lien senior secured notes.

Proceeds will be used to, among other things, pay fees and expenses, satisfy other payment obligations under the plan, and for other general corporate purposes.

Mallinckrodt also entered into a $200 million accounts receivable financing facility.

The company also reinstated $495 million of its existing first-lien senior secured notes and issued $1.76 billion of new first-lien senior secured term loans to the holders of its existing term loans, issued $323 million in new second-lien senior secured notes to the holders of its existing second-lien senior secured notes and issued $375 million of new second-lien senior secured notes to the holders of some of its existing unsecured senior notes.

New common stock

In connection with emergence, all of Mallinckrodt's existing ordinary shares were canceled. Mallinckrodt issued 13,170,932 new ordinary shares to its guaranteed unsecured noteholders.

Mallinckrodt also issued 3,290,675 warrants with a strike price of $103.40 to the opioid claimants and adopted a management incentive plan providing for the issuance to management, key employees and directors of the company of equity awards with respect to up to a total of 1,829,068 shares.

Mallinckrodt's new shares are anticipated to trade over-the-counter under the ticker symbol "MNKPF" until the company relists on a national securities exchange.

Leadership changes

The company also announced Thursday that Sigurdur Olafsson has been appointed as president and chief executive officer and a member of Mallinckrodt's board, effective June 25. He was most recently CEO of Hikma Pharmaceuticals and had previously been president and CEO of the global generic medicines group of Teva Pharmaceuticals.

Mark Trudeau has stepped down from his role as president and CEO, effective Thursday.

The company's board now comprises six independent directors, including Bisaro, Daniel Celentano, Riad El-Dada, Neal Goldman, Woodrow Myers and James Sulat. The board’s directors will total seven when Olafsson joins later this month.

Litigation resolved

As a result of the reorganization process, Mallinckrodt said it has significantly improved its financial position and resolved numerous lawsuits it was facing prior to the Chapter 11 proceedings.

The company's plan of reorganization and Irish law scheme of arrangement include key legal settlements that resolve opioid claims brought against the company and litigation matters involving Acthar Gel, among other claims, and provides for significant equitization of the company's guaranteed unsecured notes.

“Mallinckrodt is now the first company that has permanently resolved opioid litigation on a global scale, including any future claims that might be brought for periods prior to emergence,” the company said in the release.

“The company will continue operating its opioid business in a responsible manner, in compliance with an operating injunction agreed to with state attorneys general that has been in place since the commencement of the Chapter 11 process, and under the oversight of an independent monitor.”

Advisers

Latham & Watkins LLP, Wachtell, Lipton, Rosen & Katz, Arnold & Porter, Ropes & Gray LLP and Hogan Lovells served as Mallinckrodt's counsel. Guggenheim Securities, LLC served as investment banker and AlixPartners LLP served as restructuring adviser to the company.

Mallinckrodt is a Dublin-based developer, manufacturer, marketer and distributor of specialty pharmaceutical products and therapies. The company filed Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on Oct. 12, 2020 under case number 20-12522.

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