Johnson & Johnson talc unit LTL Management files plan; talc trust to reach $12.08 billion

By Sarah Lizee

Olympia, Wash., May 16 – Johnson & Johnson subsidiary LTL Management LLC filed a Chapter 11 plan and related disclosure statement Monday with the U.S. Bankruptcy Court for the District of New Jersey.

During the debtor’s prior Chapter 11 case, the extent of the debtor's liability for cosmetic talc-related claims was the subject of dispute between the debtor and claimants.

LTL said that after extensive negotiations, the debtor, Johnson & Johnson and Johnson & Johnson Holdco (NA) Inc. (formerly Johnson & Johnson Consumer Inc.) reached agreement with various plaintiff law firms who represent about 58,000 claimants to settle the dispute and establish the basis for a full resolution of the debtor's Chapter 11 case, including all talc-related liability.

The plan implements the settlement by providing for the creation and funding of a trust to pay the talc-related claims.

The talc trust to be created under the plan will contain two sub-trusts for the payment of talc-related claims: one for all talc-related claims that are not governmental unit claims, and the other for governmental unit claims.

The talc trust will be funded with about $12.08 billion over 25 years as follows for the benefit of holders of talc-related claims against the debtor.

On the effective date of the plan, $3 billion in cash will be delivered to the talc trust, with $400 million of that amount to be delivered to the sub-trust for governmental unit claims, and $2.6 billion to be delivered to the sub-trust for all other talc-related claims.

The $2.6 billion amount is subject to adjustment. Starting on the first business day after the confirmation date, interest will accrue on that amount at the rate of 4% per annum. The $2.6 billion will be reduced by the amount of expenses of the talc trust that are paid by the reorganized debtor in advance of the effective date of the plan.

On the first anniversary of the effective date of the plan, $2.5 billion will be delivered to the talc trust, with it all being delivered to the sub-trust for all talc-related claims other than governmental unit claims.

On each of the second, seventh, 12th, 17th and 22nd anniversary of the effective date of the plan, $1 billion will be delivered to the talc trust, with it all being delivered to the sub-trust for all talc-related claims other than governmental unit claims.

On the 25th anniversary of the effective date, $1.18 billion will be delivered to the talc trust, with it all being delivered to the sub-trust for all talc-related claims other than governmental unit claims.

On the effective date of the plan, a $400 million promissory note will be delivered to the sub-trust for all talc-related claims other than governmental unit claims, with such promissory note to mature on the first anniversary of the effective date of the plan.

LTL noted that, if the plan is confirmed and becomes effective, its funding would constitute the largest settlement ever reached in an asbestos bankruptcy case, even as compared to cases where (unlike here) the manufacturer conceded that its products contained asbestos.

The funding would also constitute the largest resolution in any mass tort product liability bankruptcy case.

All other classes of creditors and interest holders of the debtor, except for the holder of interests in the debtor, are unimpaired by the plan because the plan does not modify the legal, equitable or contractual rights of the holders of the claims or interests in those classes, other than by curing defaults and reinstating maturities, LTL said.

The only classes that are entitled to vote on the plan are class 4 talc personal injury claims and class 6 equity interests of the debtor.

Johnson & Johnson is a consumer products company based in New Brunswick, N.J. The LTL Management subsidiary filed its initial Chapter 11 bankruptcy petition on Oct. 14, 2021 under case number 21-30589. The new case was filed on April 4 under case number 23-12825.

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