Purdue Pharma secures plan confirmation after three-week-long trial

By Sarah Lizee

Olympia, Wash., Sept. 1 – Purdue Pharma, LP announced that the U.S. Bankruptcy Court for the Southern District of New York has approved its Chapter 11 plan of reorganization.

“Instead of years of value-destructive litigation, including between and among creditors, this plan ensures that billions of dollars will be devoted to helping people and communities who have been hurt by the opioid crisis,” Steve Miller, chairman of the board of directors, said in a Wednesday press release.

The confirmation order was made after a lengthy trial that took place over three weeks, in which numerous fact and expert witnesses testified, and after reviewing more than 4,000 pages of sworn declarations and expert testimony from many parties, the company said.

“Today’s decision confirming Purdue’s plan comes after a multi-year, arduous, inclusive process in which governments, creditors, and representatives of individual victims came together to forge a solution that received the support of more than 95% of Purdue’s creditors,” the company said.

“This process included more than a year of mediation among multiple groups of governmental and private creditors as well as opposite the shareholders.”

As soon as the plan becomes effective, billions of dollars in value will begin to flow into a national opioid abatement trust (NOAT) established with a mission to fund opioid crisis abatement efforts in satisfaction of the claims brought by states and localities, as well as to opioid abatement trusts established for the benefit of other creditors such as Native American tribes, hospitals, third-party payors, and children with a history of neonatal abstinence syndrome (NAS) and their guardians.

An additional $700 million to $750 million will be provided to trusts that will make distributions to qualified personal injury claimants.

Purdue will cease to exist, and substantially all of its operating assets will be transferred to a newly formed company with a public-minded mission of addressing the opioid crisis, the company said.

The new company will be owned primarily by NOAT, with the tribe trust holding a minority interest. The new post-emergence company will also develop and distribute millions of doses of opioid addiction treatment and overdose reversal medicines.

The Sackler families will have no involvement in the new company, and are paying $4.325 billion, in addition to $225 million already paid to the U.S. Department of Justice, into the estates.

Moreover, during the course of the trial, the bankruptcy court materially narrowed the scope and reach of the releases being provided to the shareholders under the settlement, the company noted.

The new company will be governed by new independent board members selected by the stakeholders.

The plan was supported by more than 95% of the more than 120,000 voting creditors, almost 97% of state and local governmental creditors, bi-partisan state attorneys general from 43 states/territories, and the official committee of unsecured creditors, the ad hoc committee of governmental and other contingent litigation claimants, the multi-state governmental entities group, the Native American tribes group, the ad hoc group of individual victims, the ad hoc group of hospitals, the third-party payor group, the ratepayer mediation participants, and the NAS committee representing caregivers and children affected by NAS who filed claims against Purdue.

Funding for the trusts comes primarily from three sources, including an initial cash distribution from the company of more than $500 million immediately upon emergence from bankruptcy; about $1 billion expected to be generated by the assets and the operations of the new post-bankruptcy pharmaceutical company through the end of 2024, for a projected total of roughly $1.5 billion, plus substantial additional recoveries expected from insurance claims; and the $4.275 billion in cash payments by the Sackler families.

In addition to the cash funding, the company estimates that about $4 billion in value could also be provided through the new company’s public health initiatives.

According to the disclosure statement, holders of secured claims and other priority claims will be paid in full in cash.

Holders of Avrio and Adlon general unsecured claims will receive payment in full in cash.

Holders of other general unsecured claims are disputed. Except to the extent a holder and the debtors agree to different treatment, holders will receive their pro rata share of the other general unsecured claim cash, which amounts to $15 million.

Intercompany claims will be reinstated or canceled with no distribution.

Holders of other subordinated claims and PPLP and PPI interests will not receive any distribution.

Purdue Pharma is a Stamford, Conn.-based drug manufacturer. It filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York on Sept. 15, 2019 under case number 19-23649.

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