Mallinckrodt enters forbearance until Aug. 15 with creditors, trust

Chicago, July 17 – Mallinckrodt plc entered into forbearance agreements on Sunday with creditors and the Opioid Master Disbursement Trust II until Aug. 15, according to an 8-K filing with the Securities and Exchange Commission.

The company is continuing discussions with various stakeholders.

The company has been working on its options as it evaluates its capital needs due to its obligations under the opioid settlement and its long-term debt.

Mallinckrodt currently owes a $200 million payment to the trust.

It is also working with holders on interest payments it has decided not to make.

This includes holders of its 11˝% first-lien senior secured notes due 2028 and 10% second-lien senior secured notes due 2029. The agreement was reached with 75% of holders of the 2028 notes and a majority of holders of the 2029 notes.

The company did not make payments on June 15 and had a 30-day grace period.

If a default is declared, it will also trigger a default on the company’s first-lien senior secured term loan credit facility. So, the company has also entered into a forbearance agreement with holders of more than half of the loans outstanding and Acquiom Agency Services LLC and Seaport Loan Products LLC, as co-administrative agents.

Further, the defaults could potentially result in a cross-default on the company’s ABL credit agreement from June 16, 2022. Accordingly, there is also a forbearance agreement now in place with the required lenders and Barclays as administrative agent and collateral agent. The ABL lenders agreed to the forbearance in return for a 100 basis points increase in the margin and a cap in availability of $100 million.

The company is still deciding whether it will file for a U.S. bankruptcy or a foreign bankruptcy, or its ultimate path.

Mallinckrodt is a Dublin-based developer, manufacturer, marketer and distributor of specialty pharmaceutical products and therapies.

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