After floating the idea earlier this month, Mallinckrodt has formally declared its intention to kick off another round of bankruptcy proceedings in the coming days.
The plan—which would mark Mallinckrodt’s second go at Chapter 11 since Oct. 2020—is aimed at reducing the company’s total debt by approximately $1.9 billion, Mallinckrodt said in a press release Wednesday.
Mallinckrodt is entering the deal with major shareholders and an opioid victim’s trust, the company said.
As part of the plan, the company will make one final payment of $250 million to the trust, alongside the $450 million it has already paid. Mallinckrodt had previously been expected to shell out $1.7 billion in the litigation settlement.
Around $1 billion in opioid-related payouts under the company's prior settlement could be under jeopardy.
Mallinckrodt is “planning to use bankruptcy to push down what [the company] promised to pay us,” Joseph Steinfeld, a lawyer representing thousands of alleged Mallinckrodt opioid victims, said in a statement.
He added that giving Mallinckrodt years to pay its settlement agreements was a mistake.
“It would have been better to get a lump sum from the company,” Steinfeld told The Wall Street Journal. “We didn’t want to wait that long, but we agreed to wait in an effort to assist the company.”
Mallinckrodt emerged from its previous bankruptcy bid in June 2022, the same month it agreed to that $1.7 billion settlement as part of a “new beginning” for the company.
But just a few months back, Mallinckrodt failed to make an annual $200 million settlement payment, at the time suggesting another bankruptcy was in the offing.
To complicate things further, investors in June filed a class-action lawsuit that accused Mallinckrodt of making false and misleading statements about the financial health of the company.
Earlier this month, meanwhile, the company’s CEO Siggi Olaffson said Mallinckrodt continued to “actively evaluate our financial situation and consider our options.”
Mallinckrodt plans to operate "normally” during the bankruptcy proceedings, the company said.
After this year's second quarter, Mallinckrodt had about $480.6 million in cash on hand. The company reported a second-quarter loss of $748 million.
Mallinckrodt's share price fell 20% on Wednesday to around 46 cents.