Good news for Mallinckrodt (OTC:MNKTQ) as a US bankruptcy court has given the green light to the company’s reorganization plan, setting the stage for its emergence from Chapter 11 by the end of the year.
According to a press release by the Ireland-based pharmaceutical company, it expects to formally exit Chapter 11 in Q4 once Irish examination proceedings are concluded and all conditions of the plan are met or waived.
The court-approved plan not only ensures Mallinckrodt’s successful reemergence, but also allows the company to eliminate over $1 billion in payments owed to a trust for opioid addicts. This settlement resolves thousands of lawsuits stemming from Mallinckrodt’s alleged involvement in the US opioid crisis, with the trust being established during a prior bankruptcy in 2020, as reported by the Wall Street Journal.
As part of the reorganization, Mallinckrodt’s existing shares will be cancelled, while creditors will receive new shares. Additionally, the company’s creditors are considering the sale of Mallinckrodt’s generics unit, which produces opioid products.
Senior creditors, such as Deerfield Management, Silver Point Capital, and Marathon Asset Management, can expect to receive between $0.81 and $0.95 on the dollar, while junior debt investors will receive approximately $0.11 on the dollar.
Although objections were raised by Alta Fundamental Advisers and United Equities, who argued that alternative restructuring options existed for Mallinckrodt, the bankruptcy court overruled their objections, as reported by the Journal.
