We are advising an ad hoc group of first-lien noteholders

Davis Polk is advising an ad hoc group of holders of first-lien notes due 2025 in connection with the chapter 11 restructuring of Mallinckrodt plc and certain of its subsidiaries (collectively, “Mallinckrodt”). Certain members of the ad hoc group are providing backstop commitment and funding of a $250 million debtor-in-possession term loan facility to Mallinckrodt.

On August 23, 2023, Mallinckrodt, holders of approximately 72% of the aggregate principal amount of Mallinckrodt’s first-lien debt and approximately 71% of the aggregate principal amount of Mallinckrodt’s second-lien debt, and the Opioid Master Disbursement Trust II (“Opioid Trust”) entered into a restructuring support agreement (RSA). On August 28, 2023, Mallinckrodt filed for chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Delaware and filed a prepackaged plan of reorganization and disclosure statement effectuating the terms of the restructuring contemplated by the RSA. On August 30, 2023, at Mallinckrodt’s first day hearing, the debtor-in-possession term loan facility was approved on an interim basis.

Pursuant to the RSA and the plan, Mallinckrodt will reduce its first-lien term debt from $2.86 billion to $1.65 billion, which may be in the form of either a new money syndicated credit facility or takeback debt distributed to post-petition term lenders and prepetition first-lien creditors, and will eliminate its second-lien debt entirely. Holders of the first-lien term debt will receive 92.3% of Mallinckrodt’s reorganized equity (subject to certain dilution), cash (subject to certain specified thresholds) and takeback debt (or cash in lieu thereof). Holders of the second-lien debt will receive 7.7% of Mallinckrodt’s reorganized equity (subject to certain dilution). The Opioid Trust settled its deferred cash payment claims with a single lump sum cash payment of $250 million prior to the commencement of the chapter 11 bankruptcy and a four-year contingent value right for 5% of Mallinckrodt’s reorganized equity (subject to certain dilution).

Mallinckrodt is a global business consisting of multiple wholly owned subsidiaries that develop, manufacture, market and distribute specialty pharmaceutical products and therapies. The company’s specialty brands reportable segment’s areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, hepatology, nephrology, pulmonology, ophthalmology and oncology; immunotherapy and neonatal respiratory critical care therapies; analgesics; cultured skin substitutes and gastrointestinal products. The company’s specialty generics reportable segment includes specialty generic drugs and active pharmaceutical ingredients.

The Davis Polk restructuring team includes partners Damian S. Schaible and Darren S. Klein, counsel Aryeh Ethan Falk and Jon Finelli and associates Helen Zhang, Amber Leary and Lily Zhou. The litigation team includes partner James I. McClammy, counsel Marc J. Tobak and associate Allegra M. Bianchini. The tax team includes partner Corey M. Goodman. All members of the Davis Polk team are located in the New York office.