Mallinckrodt PLC (NYSE:MNK) stock tumbled a further 15% after the pharmaceutical company confirmed it had initiated voluntary prepackaged Chapter 11 proceedings in the Delaware Bankruptcy Court, just over a year after coming out of a previous bankruptcy.
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 expects to complete the court-supervised process in the fourth quarter of 2023.
Mallinckrodt, one of the largest manufacturers of opioids, emerged out of its first bankruptcy in June 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.
The company was a defendant in more than 3,000 lawsuits alleging that it used deceptive and misleading marketing tactics to boost its sales of highly addictive opioid drugs, according to a report on Reuters.
The financial restructuring will reduce its total funded debt by about $1.9 billion, increase free cash flow generation, extend maturity runway and better position the business for long-term success, the company said in a statement.
The RSA also provides a final, one-time payment of $250 million that was made to the Trust on August 24, 2023. In addition to the $450 million the company previously paid, it said the payment is intended to support the Trust's mission to address the US opioid crisis and fund addiction treatment.
"We are moving forward with the anticipated next steps for our financial restructuring plan and appreciate the significant support of our key stakeholders to reach this milestone,” the company’s president and CEO Siggi Olafsson said.
“Implementing this agreement will meaningfully enhance Mallinckrodt's financial foundation and better position the business for the future. We expect to complete this process on an expedited basis and emerge as a stronger organization that will continue to help improve outcomes for patients with severe and critical conditions.”
The company’s shares traded at $0.34 by midday in New York, taking their year-to-date loss to almost 96%.
Contact the author at stephen.gunnion@proactiveinvestors.com