Mallinckrodt announced the Company and its specialty generics-focused subsidiaries Mallinckrodt, SpecGx and certain other affiliates (Specialty Generics) have reached an agreement in principle on the terms of a global settlement that would resolve all opioid-related claims against the Company, Specialty Generics, and the Company's other subsidiaries. The agreement in principle has been reached with a court-appointed plaintiffs' executive committee representing the interests of thousands of plaintiffs in the opioid multidistrict litigation, and is supported by a broad-based group of 47 state and U.S. Territory Attorneys General.
Under the terms of the proposed settlement, which would become effective upon Specialty Generics' emergence from a contemplated Chapter 11 process, subject to court approval and other conditions:
Plaintiffs would receive $1.6 billion in structured payments, of which $300 million would be received upon Specialty Generics' emergence from the completed Chapter 11 case, $200 million would be received on each of the first and second anniversaries of emergence, and $150 million would be received on each of the third through eighth anniversaries of emergence. The substantial majority of those payments are expected to be contributed to a trust which, among other things, would establish an abatement fund to be administered to cover the costs of opioid-addiction treatment and related efforts.
Upon Specialty Generics' emergence from the contemplated Chapter 11 process, the trust would receive warrants, exercisable at $3.15 per share, to purchase ordinary shares that would represent approximately 19.99% of the Company's fully diluted outstanding shares, including after giving effect to the exercise of the warrants.
Specialty Generics would abide by certain agreed-upon operating covenants.
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A copy of the term sheet outlining the terms of the proposed settlement, including the conditions to the effectiveness of the settlement, has been filed as an exhibit to a Form 8-K filed by the Company today with the U.S. Securities and Exchange Commission.
To implement the proposed settlement, the Company expects that Specialty Generics, which manufactures certain generic opioid products, among other products, will file voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the coming months. Mallinckrodt and its Specialty Brands-related subsidiaries would not be part of the Chapter 11 filing. This court-supervised process is expected to lead to the creation of a trust which, among other things, would establish an abatement fund to offset the expense of helping to combat opioid addiction and providing support to communities impacted by opioid abuse. The court-supervised process is also expected to provide a fair, orderly, efficient and legally binding mechanism to resolve all opioid-related claims against the Company, Specialty Generics, and all of Mallinckrodt's other subsidiaries and related entities. It is expected that Mallinckrodt plc would receive the benefit of a "channeling injunction" that would provide for the release of all opioid-related claims that have been or could have been asserted against Mallinckrodt plc or its subsidiaries related to Specialty Generics' manufacture and sale of opioids prior to the time the Specialty Generics Chapter 11 plan becomes effective.
Mallinckrodt and all of its subsidiaries, including Specialty Generics, are operating as normal and are expected to continue operating normally throughout the court-supervised process contemplated for Specialty Generics. The Company currently expects that Specialty Generics would continue to be an indirect, wholly owned subsidiary of Mallinckrodt plc during and following emergence from the contemplated court-supervised process. Upon emergence, the Company will continue to evaluate strategic options for the Specialty Generics business.