Mallinckrodt Trust Says ‘Gruesome’ Deal Was Best It Could Do

Representatives for opioid victims said they agreed to forgo the remaining $1 billion of payments they’re owed in a revised deal with Mallinckrodt Plc to ensure they at least get some of the funds the bankrupt drugmaker had promised injury claimants last year.

David Molton, a lawyer representing the trust that agreed to the reduction, said Wednesday the trustees’ decision to allow Mallickrodt to cut victims’ payments “was particularly gruesome.” But the drugmaker’s business has declined, forcing it this week into Chapter 11 bankruptcy for the second time in three years.

And the trust was at a disadvantage in negotiating because it is an unsecured creditor, meaning it can only be paid after secured creditors like banks are paid. Mallinckrodt has about $3.5 billion of secured debt.

The trustees agreed to a final payment of $250 million, believing the deal they struck with Mallinckrodt was the best option available to them, Molton said.

The company reached the agreement with opioid victims and other creditors earlier this month, according to court documents. The $250 million opioid payment is part of Mallinckrod’s pre-negotiated bankrutpcy.

Its total payments to the victims were $700 million, following a $450 million payment in June 2022. The company had promised in its first bankruptcy to pay opioid claimants about $1.7 billion.

“It is an understatement for me to say this is a very bittersweet day for the trustees,” Molton said on Wednesday.

Mallinckrodt’s restructuring deal will also trim about $1.9 billion in long-term debt and has broad support from its lenders. The company intends to exit its second Chapter 11 case in November.

The bankruptcy is Mallinckrodt Plc, 23-11258, in the US Bankruptcy Court for the District of Delaware.

To contact the reporter on this story:
Jonathan Randles in New York at jrandles5@bloomberg.net

To contact the editors responsible for this story:
Claire Boston at cboston6@bloomberg.net

Dan Wilchins

© 2023 Bloomberg L.P. All rights reserved. Used with permission.