Drugmaker Mallinckrodt Plc won court approval for a new debt-reduction plan that will slash about $1 billion from the sum the company must pay victims of America’s opioid epidemic.
(Bloomberg) — Drugmaker Mallinckrodt Plc won court approval for a new debt-reduction plan that will slash about $1 billion from the sum the company must pay victims of America’s opioid epidemic.
US Bankruptcy Judge John Dorsey overruled objections from shareholders and a group of holdout bondholders during a court hearing Tuesday, in Wilmington, Delaware. They claimed that Mallinckrodt’s management incentive plan is unfair to creditors and that the manufacturer of opioid pain medication should have tried harder to resolve its debt woes without filing a Chapter 11 case.
Dorsey ruled that Mallinckrodt’s reorganization plan does not violate any bankruptcy rules and is fair to creditors. Under the plan, shareholders will be wiped out, which happens in nearly all big bankruptcies unless creditors are paid in full.
The 156-year-old company’s new reorganization plan replaces one approved by Dorsey last year that left the company struggling to pay about $3.6 billion in debt and nearly $1.3 billion to a trust for opioid victims. Under the current plan, Mallinckrodt will slash what it owes lenders to $1.75 billion and will pay the opioid trust $250 million.
Mallinckrodt’s reorganization is built on settlements with key debtholders.
When the company filed for its first bankruptcy in 2020, it faced about 3,000 lawsuits and investigations in all 50 states related to its sale of opioids and other drugs, according to court papers.
The case is Mallinckrodt Plc, 20-12522, U.S. Bankruptcy Court for the District of Delaware (Wilmington).
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