Mallinckrodt opioid trust assets allocation issue to be mediated

By Sarah Lizee

Olympia, Wash., Feb. 12 – Mallinckrodt plc received court approval of its motion to establish mediation procedures and appoint Kenneth R. Feinberg to mediate the allocation of opioid trust assets, according to an order filed Thursday by the U.S. Bankruptcy Court for the District of Delaware.

The mediation will terminate on March 11, unless the debtors, official committee of unsecured creditors and non-federal governmental opioid claimants agree to extend the mediation.

The company said in its motion that it has reached an agreement with restructuring support agreement parties to pursue a Chapter 11 plan of reorganization, which provides that all opioid claims will be channeled to an opioid trust, and that the opioid trust will be funded with a fixed pool of assets that includes, among other assets, $1.6 billion in deferred cash payments and warrants in the reorganized debtors in complete satisfaction of all opioid claims that can be asserted against the debtors.

“While a proposed plan embodying the RSA is not yet filed and could be the subject of litigation, the issue of allocation of the opioid trust assets among opioid claimants remains a key open issue that must be addressed,” the company said.

“The debtors now stand at a critical juncture: they have an opportunity to reach a global agreement with the vast majority of opioid claim holders regarding their allocable share of the opioid trust assets by pursuing voluntary mediation with these parties, thereby avoiding the pitfalls of one or more of the opioid claimants contesting confirmation on grounds that the opioid trust assets have been unfairly allocated.”

Mallinckrodt said confirming a plan in the absence of meaningful consensus over allocation of the opioid trust assets will entail delay and expensive litigation.

Dublin-based Mallinckrodt develops, manufactures, markets and distributes specialty pharmaceutical products and therapies. The company filed Chapter 11 bankruptcy on Oct. 12 under case number 20-12522.

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