Mallinckrodt retreats from new term loan, credit facilities amendment plans

By Sara Rosenberg

New York, March 18 – Mallinckrodt said in an 8-K filed with the Securities and Exchange Commission on Wednesday that, based on informal communications from advisers to the lender parties, it does not expect to be able to get its proposed $690 million term loan due March 2024 and amend its existing credit facilities.

As a result, the company is now looking to engage in discussions with debt holders regarding potential refinancing alternatives.

The new term loan was talked with pricing of Libor plus 650 basis points with a 0.75% Libor floor.

Transaction payments offered for the new term loan were a 2% backstop payment payable in cash to some backstop parties, and a 2% commitment payment payable to all participating lenders including backstop parties.

Included in the new term loan was call protection of 103 in year one, 102 in year two and 101 in year three, amortization of 5% per annum, and a 4x first-lien net leverage covenant.

Existing term loan lenders were offered the option to participate in $310.3 million of the new term loan with the balance expected to be provided by some senior noteholders.

The company’s existing credit facilities consist of a $900 million revolver due February 2022, a $1.517 billion term loan due September 2024 and a $403 million term loan due February 2025.

The proposed credit facilities amendment would have allowed the implementation of a global settlement to resolve all opioid-related claims as well as permit new money financing and an exchange offer to address some near-term maturities.

Also, the amendment would have increased pricing by 100 bps to Libor plus 375 bps on the 2024 term loan and Libor plus 400 bps on the 2025 term loan, added 101 soft call protection for one year to the term loans, raised amortization to 2% per annum from 1% per annum on the term loans, added a 4x first-lien net leverage covenant to the currently covenant-lite term loans and reduced capacity available under some baskets.

The revolver amendment would have revised the financial covenant to 4x first-lien net leverage from 5x net total leverage springing at 25% utilization.

Furthermore, the amendment would have modified the excess cash flow sweep and waived the “going concern” or similar financial reporting qualification.

Lenders were offered a 50 bps amendment fee.

Deutsche Bank Securities Inc. is the administrative agent on the deal.

The plan was to use up to $615 million of the new term loan to refinance the company’s 2020 notes, and the remainder would have been used for accrued and unpaid interest on the 2020 notes and for general corporate purposes.

Mallinckrodt is a Staines-Upon-Thames, U.K.-based developer, manufacturer and marketer of specialty pharmaceutical products and diagnostic imaging agents.

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