Thu 08/27/2020 17:44 PM
Certain holders of Mallinckrodt unsecured notes have signed nondisclosure agreements in anticipation of discussions with the company about a potential financial restructuring transaction amid a series of interest payments due Oct. 15, according to sources. The holders are part of an ad hoc group that is represented by Paul Weiss as legal advisor and Perella Weinberg Partners as financial advisor. Continue reading for the Americas Core Credit by Reorg team's update on a potential Mallinckrodt financial restructuring, and request a trial to access our coverage of other financial restructurings.

Mallinckrodt earlier this month warned that Mallinckrodt plc and most of its subsidiaries could file chapter 11 in the near term, a notable shift from the sole filing of the specialty generics business previously contemplated under the company’s global opioid settlement agreement in principle announced in February. The drug manufacturer attributed a potential bankruptcy filing to the pressures from the ongoing opioid litigation, the adverse ruling in the Acthar Gel rebate litigation, and its existing debt including covenant compliance.

On Oct. 15, Mallinckrodt faces about $69 million of interest payments across five tranches of secured and unsecured notes. The company has also said it expects to breach the 5x net leverage ratio covenant under its revolver in the first quarter of 2021 if it were to pay the estimated $650 million Acthar Gel Medicaid retrospective rebate charges.

As of June 30, the company’s liquidity was $818.3 million, all cash.

The 514.7 million 5.625% unsecured notes due 2023 last traded in size on Aug. 26 at 20.9, and the $387.2 million 5.5% unsecured notes due 2025 last traded in size on Aug. 26 at 19.5, according to TRACE. The $495 million 10% first lien notes due 2025 last traded in size on Aug. 26 at 104.25, yielding 8.6%, and the $322.9 million 10% second lien notes due 2025 last traded in size on Aug. 26 at 77.5, yielding 17.2%.

Mallinckrodt, Paul Weiss and Perella Weinberg Partners did not immediately respond to requests for comment.

--Harvard Zhang, Andrew Berlin

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