Mallinckrodt $1 Billion Pre-Bankruptcy Debt Swap Faces Scrutiny

Mallinckrodt Plc completed a billion dollar debt swap less than a year prior to filing for Chapter 11 that unfairly improved certain creditors’ position in the opioid manufacturer’s bankruptcy case, according to more than 1,000 governmental entities.

Creditors should have more time to challenge the liens resulting from the transaction, which swapped unsecured notes worth about $1.2 billion for secured notes worth some $818 million, the government group said in a court filing Tuesday.

Mallinckrodt’s cash also should be made available to pay for the challenge, the group of cities, counties, towns, tribal nations, hospitals, and school districts in 38 ...