Mallinckrodt PLC (NYSE:MNK) said it plans to initiate voluntary prepackaged Chapter 11 bankruptcy proceedings in the US in a matter of days to give it room to restructure its debt and reduce the amount it owes to opioid victims.
Its shares fell 18% to $0.48 shortly before midday in New York, taking their year-to-date loss to 94%.
The pharmaceutical company, one of the largest manufacturers of opioids, emerged out of its first bankruptcy in 2022 but failed to make a $200 million payment to an opioid victims trust due in June, prompting it to launch a negotiation with its stakeholders, according to a report on Reuters.
Under a Restructuring Support Agreement (RSA) reached with a substantial majority of its debtholders and the Opioid Master Disbursement Trust II, the company said it will make a final payment of $250 million to the Trust prior to the Chapter 11 filing, in addition to the $450 million previously paid, to support the Trust's mission to address the US opioid crisis and fund addiction treatment.
The RSA will also reduce its total funded debt by approximately $1.9 billion, increase free cash flow generation, extend maturity runway and better position the business for long-term success.
Constructive discussions
"After several months of constructive discussions, we are pleased to have reached this agreement with our key stakeholders, which will enable Mallinckrodt to better align our balance sheet with our current business plan," president and CEO Siggi Olafsson said in a statement.
"While we have made important progress over the past year, the steps we are taking now will strengthen our ability to navigate the challenges that have affected our business.”
Under the terms of the RSA, the company said it deleverage by reducing its first lien debt by approximately $1.2 billion and eliminating all of its approximately $650 million of second lien debt while transitioning ownership of the company to its creditors.
Settlements related to its Acthar Gel will be assumed under the RSA without modification, it added.
Vendors and suppliers are expected to be paid in the ordinary course and employees are expected to continue receiving their pay and benefits without interruption.
The company said it has received commitments for $250 million in new financing from certain of its creditors in connection with the RSA and has obtained new borrowing availability from lenders under its asset-based loans, all of which will be subject to court approval.
“As we move forward, we remain focused on advancing our business priorities and operational initiatives, including seeking growth opportunities across our portfolio and executing on our recent and planned product launches,” Olafsson added.
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