February 23, 2022
Mallinckrodt – a global business that develops, manufactures, markets, and distributes specialty pharmaceutical products and critical care therapies – has announced that its Plan of Reorganization (the “Plan”) has been confirmed by the US Bankruptcy Court for the District of Delaware. Implementing the Plan and restructuring support agreement (RSA) will deleverage Mallinckrodt's balance sheet by approximately US$1.3 billion and resolve thousands of lawsuits the company was facing prior to the Chapter 11 proceedings by channeling opioid claims and many other litigation and general unsecured claims to various creditor trusts. These transactions were heavily negotiated for over a year leading into the Chapter 11 filing in October 2020 allowing Mallinckrodt to enter Chapter 11 with the support of over 84% of its guaranteed unsecured bondholders, 50 states and territories, and the Plaintiffs Executive Committee in the opioid multidistrict litigation. During the bankruptcy, the RSA gained additional support from over 1,100 municipalities and tribes as well as a majority of the first lien term lenders.
Upon the bankruptcy filing, the Mallinckrodt Chapter 11 cases faced the unique intersection of antitrust and bankruptcy law with a variety of insurance claimants and private payors of Acthar alleging Sherman Act, conspiracy, and RICO violations related to price, marketing, and distribution of Acthar both pre-filing and post-filing. In addition, the company faced generics price fixing, asbestos, and royalty claims that were successfully resolved through a combination of litigation and deal-making. The company believed it had meritorious defenses to the various antitrust, tort, and other litigations but chose to enter into the comprehensive plan settlements to eliminate the costly and burdensome litigation overhang while strengthening its balance sheet.
After a 16-day trial, the Plan was confirmed, which approved a consensual and non-consensual third-party release, a channeling injunction, and provided for a permanent injunction of certain litigation against the company. Mallinckrodt has been subject to a recognition proceeding in Canada for certain Debtors and commenced an Irish examinership for the parent entity, Mallinckrodt plc, on February 14, 2022, as another key step in the restructuring.
Latham & Watkins LLP represents Mallinckrodt in the matter with a cross-practice team led by Global Chair of the Restructuring & Special Situations Practice George Davis and Vice Chair Jeff Bjork; New York partners George Klidonas, Keith Simon, and Anupama Yerramalli; Chicago partner Jason Gott; Washington, D.C. partner Andy Sorkin; and New York counsel Hugh Murtagh; with associates Liza Burton, Chris Beaucage, Madeleine Parish, Randall Weber-Levine, Scott Yousey, Jason Moehlmann, Jonathan Gordon, and Whit Morley – all members of the firm’s Restructuring & Special Situations Practice. The bankruptcy litigation team was led by New York partner Chris Harris, Boston partner Gwyn Williams, Los Angeles partner Amy Quartarolo, and Boston counsel Betsy Marks. Advice was also provided on corporate matters by Boston partners Hans Brigham, Julie Scallen, Wes Holmes, and New York partner Ben Stern, with associates Tyler Mills and Sam Niles; on antitrust matters by Washington, D.C. partner Maggy Sullivan and counsel Anna Rathbun, with associate Doug Tifft; on tax matters by Chicago partner Joe Kronsnoble, with associate Michael Zucker; on employee benefits matters by Chicago partner Robin Struve; on environmental matters by associate Peter Viola; on healthcare matters by Washington, D.C. partners Stuart Kurlander and Eric Greig; and on appellate matters by Washington, D.C. partner Melissa Sherry, with associate James Tomberlin.