Endo International, first-lien lenders reach settlement with unsecured, opioid creditors

By Sarah Lizee

Olympia, Wash., March 6 – Endo International plc and first-lien lenders have reached a settlement with the official committee of opioid creditors and the official committee of unsecured creditors, according to an 8-K filed Friday with the Securities and Exchange Commission.

As previously reported, in November, the company filed a bid procedures motion that sought to designate an entity formed by the first-lien group as stalking horse bidder.

Both committees objected to the motion and also filed motions to obtain standing to pursue challenges with respect to the company’s secured creditors’ liens.

In January, the parties were ordered to mediate by the U.S. Bankruptcy Court for the Southern District of New York.

Creditors committee deal

The deal with the creditors committee includes $60 million of cash, 4.25% of equity in the purchaser (premised on $2.5 billion of net funded debt), and a litigation trust that will include claims (being bought by the purchaser) against (i) non-continuing directors and former officers (as against insurance), (ii) certain third-party advisers, and (iii) certain additional third parties, including parties to certain prepetition transactions with the debtors.

The litigation trust will also receive all the rights to the debtors’ hundreds of millions of dollars in face amount of product liability insurance policies providing coverage for opioid, mesh and ranitidine claims, among others, pre-2019 director and officer insurance policies, and commercial general liability policies.

The trust will be structured in a way that facilitates its ability to maximize value of litigation claims and insurance.

The deal also includes an investment right for $160 million of common equity at a total enterprise value of $5.125 billion (and $2.5 billion net funded debt) open to non-opioid unsecured creditors who subscribe no later than 14 days ahead of the sale hearing.

As part of the deal, any first-lien holder that executes the restructuring support agreement prior to the bid procedures hearing will be treated the same as those that had signed prepetition.

The deal applies to present, non-opioid unsecured creditors, including second-lien holders.

Opioid committee deal

The opioid committee deal includes $119.2 million of gross cash consideration payable to private present opioid claimants, payable in three installments within two years of closing. The first payment is $29.7 million at closing, the next payment is $29.7 million on the first anniversary of closing, and the last payment is $59.7 million on the second anniversary of closing.

The payment stream is subject to a prepayment option where the purchaser may pay the whole amount by paying $89.2 million at closing, $95.3 million at six months or $102.9 million at the one-year mark.

If the purchaser elects to prepay a voluntary public opioid trust amount, then it will also prepay the voluntary private opioid trust amount.

The deal is subject to claimant documentation to be agreed, which will contemplate consensual voluntary releases by the claimant of the debtors and its directors and officers, but not claimants’ direct claims against certain categories of third parties involved in the production, distribution, marketing, promotion or sale of opioid products.

The opioid committee, working with private claimants, will determine allocation among private opioid claimants with no input from other parties. The committee may select a mediator for allocation, subject to the hourly professional fee cap, as well as timing constraints of the case.

The committee will be given due process rights with respect to standing motion for estate causes of action to be preserved in the contingent event where the buyer no longer is purchasing estate causes of action.

In addition to the above, the first-lien informal group has agreed with the debtors on certain modifications to the wind-down budget.

Endo said that some mediation parties still have unresolved issues, and it hopes that discussions can continue with those parties.

Endo is a Dublin, Ireland-based specialty pharmaceutical company that filed bankruptcy on Aug. 16, 2022. The Chapter 11 case number is 22-22549.

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