High Court approves Mallinckrodt’s debt restructuring plan

The High Court has approved a debt restructuring program for the Dublin-based but US-run pharmaceutical company Mallinckrodt.

Confirmation of the proposals by the Irish courts was one of 23 preconditions attached by a US court to the long-negotiated debt reduction plan, some of which have yet to be completed in other jurisdictions.

Judge Michael Quinn issued the orders approving the plan of arrangement at the request of Examiner Michael McAteer of Grant Thornton, represented by Kelley Smith SC.

The Irish scheme is expected to become binding on a date next month, which will coincide with the effective date of the US plan. This will happen when all 23 prerequisites have been met or waived, the judge noted.

There are many “moving parts” in various jurisdictions to ensure conditions are met, and a delay by the Irish court could jeopardize the whole restructuring, the judge said.

Mallinckrodt employs 120 people at its factory in Blanchardstown, West Dublin, working in areas including research and development, manufacturing, supply chain management and other support functions.

The opioid maker is pursuing a US court-approved Chapter 11 reorganization that would create a $1.6 billion (€1.5 billion) trust to resolve opioid-related claims with US states, governments locals and individuals. He also agreed to pay the US government $260 million to absolve a claim that he underpaid rebates on Acthar Gel, a hormone treatment to relieve inflammation.

The reorganization plan will reduce its debt by $1.3 billion. Existing shares will be wiped out, while unsecured secured bondholders swap debt for ownership of the reorganized company.

Delaware Judge John Dorsey upheld Mallinckrodt’s Chapter 11 plan in February. A number of appeals against his orders are pending in US courts.

The Irish court should not simply “approve” the US court’s decision, Justice Quinn said, and must ensure that the test under Irish law has been met.

Support

The judge noted there was “overwhelming support” among creditors for the proposals, according to a vote earlier this month.

Of those who participated in the motion hearing, only one party, the insurance company Attestor Limited, objected, calling the plan “unfair and unfair”. He said he has filed an appeal in the United States against Judge Dorsey’s confirmation of the plan and acknowledges that it is “ultimately a fight against American law”.

The petition in the Irish court made comparisons between the results for the business under various hypothetical outcomes, such as liquidation. Justice Quinn said the evidence was that a liquidation scenario would mean creditors would receive no dividends and approval of the plan would result in a “significantly better outcome” for them.

He said the plan will give the company a “good prospect of operating on a sustainable basis in the future”. The judge was satisfied that the proposals passed the test of Irish law and were fair and just and did not prejudice any party.

He said the debt restructuring was in the best interest of the company and for that reason he should affirm the proposals.

The case will be mentioned in court on a date next month.

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