Mallinckrodt Opioid Plan: Sacrifice a Part to Save the Whole

Mallinckrodt Plc is trying to avoid the fate of peers by keeping most of the company out of bankruptcy, while using the Chapter 11 of one business to settle a mountain of opioid-related litigation.

The strategy rests on Mallinckrodt’s ability to get broad legal protections that would shield the parent company from claims it helped create the U.S. opioid crisis. The company said in a statement it expects to receive a so-called channeling injunction to divert all claims to its specialty generics unit, which it would place into bankruptcy.

But there are hurdles to the plan, which could meet resistance ...