Mallinckrodt liquidation would result in $5.2 billion financial hole, court told

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Creditors of Mallinckrodt, the Dublin-based but US-led drugmaker, would face a $5.24bn (€4.6bn) financial shortfall if the Irish High Court does not did not approve a debt restructuring plan and that the company succumbed to liquidation, the court heard. .

An independent expert’s report confirming the court’s Monday appointment of an interim reviewer at Mallinckrodt, written by Deloitte partner Mark Degnan, said a debt restructuring plan consistent with that sanctioned by a Delaware court earlier this month offers a better outcome for creditors than a liquidation.

“A liquidation of the company would result in a significant deficit of around $5.2 billion (€4.6 billion),” Degnan said in the report, relying on the firm’s estimates. of American consultancy AlixPartners, which advised Mallinckrodt.

“By comparing the estimated result position, the rearranged [Mallinckrodt’s] emergence as a going concern, which is one of the key assumptions on which the valuation analysis is based, is more beneficial to the creditors of the company as a whole.

Acting Examiner

Judge Michael Quinn agreed on Monday to appoint Grant Thornton Ireland’s Michael McAteer as Mallinckrodt’s interim reviewer to execute a long-running restructuring plan that was hatched in the United States after the group filed its balance sheet in Delaware at the end of 2020.

Mr Degnan, who is among three Deloitte restructuring partners who recently gave notice of an Irish operation to UK debt restructuring boutique Interpath Advisory, said Mallinckrodt had a ‘reasonable prospect of survival’ . This is a prerequisite for the appointment of an examiner.

Under U.S. court protection, it agreed to a $1.7 billion settlement with 47 states and territories to resolve claims over its role in the opioid crisis. 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, which will reduce its debt by $1.3 billion, was upheld by the U.S. Bankruptcy Court for the District of Delaware earlier this month, paving the way for it to be approved or adjusted through the process of exam. Existing shares will be wiped out as part of the bankruptcy plan, while holders of secured debentures swap their debt for ownership of the restructured company.

Mr. Degnan noted in his report that the debt overhaul plan has the support of its largest secured lenders, holders of 84% of the group’s unsecured bondholders, 50 US states and territories and a committee representing opioid litigants.

Opposition risk

Brian Kennedy SC, appointed by Arthur Cox, who is advising on the Irish legal aspects of the restructuring plan, told the court there was “at least a risk” that there would be some opposition to the petition, but he didn’t know if that would happen. arise or what the nature of this opposition might be.

A small group of dissident shareholders, led by New York-based asset management firm Buxton Helmsley, said last summer they would seek to argue that their rights as shareholders had been stripped in the part of Chapter 11 proceedings when the matter came before the High Irish. To research.

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