Mallinckrodt (MNK) Enters Forbearance Extension Agreements, Discussing Chapter 11 Bankruptcy

Mallinckrodt (NYSE: MNK) disclosed:

Item 1.01. Entry into a Material Definitive Agreement.

As previously disclosed, on July 16, 2023, Mallinckrodt plc (the “Company”) and/or certain of its subsidiaries entered into certain forbearance agreements with (a) the holders of more than 75% in principal amount of the outstanding 11.50% first lien senior secured notes due 2028 issued by certain of its subsidiaries (“2028 First Lien Notes”), (b) the holders of a majority in principal amount of each of (i) the outstanding 10.00% second lien senior secured notes due 2029 issued by certain of its subsidiaries (“2029 Second Lien Notes”) and (ii) the first lien senior secured term loans due 2027 (“Term Loans”) (and the administrative agent in respect of the Term Loans) borrowed by certain of its subsidiaries pursuant to the credit agreement, dated as of June 16, 2022, by and among the Company, certain of its subsidiaries, the lenders party thereto, Acquiom Agency Services LLC and Seaport Loan Products LLC, as co-administrative agents, and Deutsche Bank AG New York Branch, as collateral agent (“Term Loan Credit Agreement”), and (c) the lenders and agents under the ABL Credit Agreement, dated as of June 16, 2022, by and among ST US AR Finance LLC, the lenders party thereto, the L/C Issuers (as defined in the ABL Credit Agreement) party thereto and Barclays Bank plc, as administrative agent and collateral agent (“ABL Credit Agreement”) (collectively, the “Forbearance Agreement Counterparties”), pursuant to which the applicable creditors and agents, as applicable, have agreed to forbear from exercising any rights or remedies until August 15, 2023 with respect to the events of default arising from the Company’s failure to make interest payments on the 2028 First Lien Notes and 2029 Second Lien Notes, unless such forbearance agreements (which contain customary termination events) are earlier terminated in accordance with the terms thereof. For further information regarding the Company’s discussions with various stakeholders and other significant developments with respect to the Company’s funded debt obligations, see the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 filed with the Securities and Exchange Commission (“SEC”) on August 9, 2023.

On August 15, 2023, the Company entered into certain extensions to the aforementioned forbearance agreements (“Forbearance Extension Agreements”) with each of the Forbearance Agreement Counterparties, pursuant to which the applicable creditors and agents thereunder, as applicable, have agreed to forbear from exercising any rights or remedies with respect to the events of default arising from the Company’s failure to make interest payments on the 2028 First Lien Senior Notes and the 2029 Second Lien Senior Notes that were due on June 15, 2023 until August 22, 2023, unless such forbearance agreements (which contain customary termination events), as amended, are earlier terminated in accordance with the terms thereof.

Pursuant to the Forbearance Extension Agreement entered into with holders of the 2028 First Lien Notes, the Company has agreed to pay approximately $19 million, plus accrued interest thereon, representing 50% of the interest payment originally due on June 15, 2023 on the 2028 First Lien Notes (the “First Installment of the 2028 First Lien Notes Interest Payment”). The Company expects to pay the remaining amount of such interest payment, including accrued interest thereon, in connection with signing a potential restructuring support agreement. Failure by the Company to the pay the First Installment of the 2028 First Lien Notes Interest Payment to the applicable paying agent on or before August 16, 2023 is an event of termination for the related forbearance agreement under the terms of the applicable Forbearance Extension Agreement.

The Board of Directors continues to actively evaluate the Company’s financial situation and consider options, and the Company is actively engaged in advanced discussions with various stakeholders. These discussions contemplate entering into a restructuring support agreement with various stakeholders that would include, among other things, the Company’s initiating Chapter 11 proceedings under the U.S. Bankruptcy Code or analogous foreign bankruptcy or insolvency laws. The contemplated Chapter 11 proceedings would cause the Company’s ordinary shares to be canceled, which would result in no recovery for holders of its ordinary shares. There can be no assurance the Company will reach an agreement in a timely manner, or at all, on terms of a restructuring support agreement that the Board of Directors would support. The Company expects to continue its current operations without material interruption and work with its business partners as usual during the course of these discussions and any potential restructuring.

The foregoing summary of the Forbearance Extension Agreements does not purport to be complete and is qualified in its entirety by reference to each of the Forbearance Extension Agreements, which are filed as exhibits 10.1, 10.2, 10.3 and 10.4 to this Current Report on Form 8-K and incorporated herein by reference.

Item 8.01. Other Events.

On August 15, 2023, the Opioid Master Disbursement Trust II (“Trust”) provided written notice that it was further extending the due date of the $200.0 million installment payment originally due on June 16, 2023 (“Opioid Deferred Cash Payment”) pursuant to the opioid deferred cash payments agreement from August 15, 2023 to August 22, 2023. The Company recognizes the important role of the Trust in helping to address the nation’s opioid crisis and fund addiction treatment and related efforts. Under the opioid deferred cash payments agreement, which was originally entered into by the Company and the Trust upon the Company’s emergence from bankruptcy on June 16, 2022 (“Effective Date”), the Company and certain of its subsidiaries agreed to make certain deferred payments to the Trust, including a $450 million payment that was paid on the Effective Date. For further information regarding the Company’s opioid-related litigation settlement obligations, see the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 filed with the SEC on August 9, 2023.

You May Also Be Interested In

• Fabric.AI stockholders approve Kopin partnership for MicroLED interconnect
• Hertz proposes $100M common stock offering via share lending deal
• CalciMedica raises up to $49M in private placement for PH program