MALLINCKRODT PLC: Bankruptcy or Receivership, Financial Statements and Exhibits (Form 8-K)

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Item 1.03. Bankruptcy or receivership.

As stated earlier, on October 12, 2020, Mallinckrodt plcan Irish limited company subject to review under Part 10 of the Irish Companies Act 2014 (“Mallinckrodt”), and certain of its subsidiaries have voluntarily brought proceedings under Chapter 11 of the Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware
(there “bankruptcy court“). Also as previously disclosed, on February 3, 2022the
bankruptcy court issued an opinion (which was subsequently revised on
February 8, 2022 to make minor corrections) indicating its intention to confirm Mallinckrodt’s amended fourth joint reorganization plan Mallinckrodt Plc
and its affiliates debtors under Chapter 11 of the Bankruptcy Code. Also, as mentioned earlier, on March 2, 2022the bankruptcy court made an order confirming the fourth amended joint plan of reorganization (with technical amendments) of Mallinckrodt Plc and its affiliates debtors under Chapter 11 of the Bankruptcy Code (as amended, supplemented or otherwise modified, the “Plan”). A copy of the plan is attached hereto as Exhibit 2.1.

As stated earlier, on February 14, 2022Mallinckrodt’s principals initiated review proceedings before the High Court of Ireland (there “Irish High Court“), and on February 28, 2022the Irish High Court made an order appointing Mr. Michael McAteer of Grant Thornton Ireland as Mallinckrodt’s reviewer (the “Reviewer”). Subsequently, on April 27, 2022the Irish High Court made an order under section 541(3) of the Irish Companies Act (the “Order”) confirming a plan of arrangement proposed by the Examiner between Mallinckrodt, its creditors and its members, which is based on and consistent in all respects with the Plan (the “Scheme”). A copy of the schematic is attached hereto as Exhibit 2.2. On April 27, 2022, the Irish High Court has also made an order under section 542(3) of the Irish Companies Act that the scheme will come into effect on the same date that the plan comes into effect. At that time, the Scheme will become binding on Mallinckrodt, its creditors and members under Irish law, the review process will end and Mallinckrodt will cease to be under the protection of the Scheme. Irish High Court. A copy of the Order, which was perfected on
April 28, 2022is attached hereto as Exhibit 99.1.

Summary of the Scheme of Arrangement

The following is a summary of the material features of the Plan as confirmed by the Irish High Court. This summary only highlights certain provisions of the Program and is not intended to be a complete description of the Program. This summary is qualified in its entirety by reference to the full text of the Plan, Diagram and Order (which includes the Plan and Diagram as Appendices), copies of which are attached hereto as Exhibits 2.1, 2.2 and 99.1, respectively, and are incorporated herein by reference. Capitalized terms used but not defined herein have the meaning ascribed to them in the Scheme.

The Scheme implements certain aspects of the Plan insofar as it relates solely to Mallinckrodt and provides for the following (among other things):

    •     Resolution of Opioid-Related Claims Against Mallinckrodt. Pursuant to the
          Scheme, on the effective date thereof (the "Effective Date") all opioid
          claims against Mallinckrodt are deemed to have been settled, discharged,
          waived, released and extinguished in full against Mallinckrodt, and
          Mallinckrodt ceases to have any liability or obligation with respect to
          such claims, which are then treated in accordance with the Plan as
          follows:



         •   Opioid claims will be channeled to one or more trusts, which will
             receive $1,725.0 million in structured payments consisting of (i) a
             $450.0 million payment upon effectiveness of the Plan; (ii) a
             $200.0 million payment upon each of the first and second anniversaries
             thereof; (iii) a $150.0 million payment upon each of the third through
             seventh anniversaries thereof; and (iv) a $125.0 million payment upon
             the eighth anniversary thereof, with an eighteen-month prepayment
             option at a discount for all but the first payment.



         •   Opioid claimants will also receive, in addition to other potential
             consideration, warrants for approximately 19.99% of reorganized
             Mallinckrodt's new outstanding shares, after giving effect to the
             exercise of the warrants, but subject to dilution from equity reserved
             under Mallinckrodt's management incentive plan, exercisable at any
             time on or prior to the sixth anniversary of the effectiveness of the
             Plan, at a strike price reflecting an aggregate equity value for the
             reorganized Debtors of $1,551.0 million.



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         •   Following effectiveness of the Plan, certain Mallinckrodt subsidiaries
             will remain subject to an agreed-upon operating injunction with
             respect to the operation of their opioid business.



    •     Resolution of Disputes with the U.S. Department of Justice and Other
          Governmental Parties Relating to Acthar Gel. Pursuant to the Scheme, on
          the Effective Date all claims of U.S. Department of Justice and other
          governmental parties relating to Acthar Gel against Mallinckrodt are
          deemed to have been settled, discharged, waived, released and
          extinguished in full against Mallinckrodt, and Mallinckrodt ceases to
          have any liability or obligation with respect to such claims, which are
          then treated in accordance with the Plan and the terms of the settlement
          that is summarized below:



         •   Mallinckrodt has reached an agreement with the U.S. Department of
             Justice ("DOJ") and other governmental parties to settle a range of
             litigation matters and disputes relating to Acthar Gel (the
             "Governmental Acthar Settlement") including a Medicaid lawsuit with
             the Centers for Medicare and Medicaid Services, a related False Claims
             Act ("FCA") lawsuit in Boston, and an Eastern District of Pennsylvania
             ("EDPA") FCA lawsuit principally relating to interactions of Acthar
             Gel's previous owner (Questcor Pharmaceuticals Inc.) with an
             independent charitable foundation. Under the Governmental Acthar
             Settlement, which was conditioned upon Mallinckrodt commencing its
             chapter 11 proceeding and provides the distributions the applicable
             claimants will receive under the Plan, Mallinckrodt has agreed to pay
             $260.0 million to the DOJ and other parties over seven years and reset
             Acthar Gel's Medicaid rebate calculation as of July 1, 2020, such that
             state Medicaid programs will receive 100% rebates on Acthar Gel
             Medicaid sales, based on current Acthar Gel pricing. Also in
             connection with the Governmental Acthar Settlement, Mallinckrodt
             entered into a five-year corporate integrity agreement with the Office
             of Inspector General of the U.S. Department of Health and Human
             Services in March 2022. As a result of these agreements, upon
             effectiveness of the Governmental Acthar Settlement in connection with
             the effectiveness of the Plan, the U.S. Government will drop its
             demand for approximately $640 million in retrospective Medicaid
             rebates for Acthar Gel and agree to dismiss the FCA lawsuit in Boston
             and the EDPA FCA lawsuit. Similarly, state and territory Attorneys
             General will also drop related lawsuits. In turn, Mallinckrodt will
             dismiss its appeal of the U.S. District Court for the District of
             Columbia's adverse decision in the Medicaid lawsuit, which was filed
             in the U.S. Court of Appeals for the District of Columbia Circuit.



         •   Mallinckrodt has entered into the Governmental Acthar Settlement with
             the DOJ and other governmental parties solely to move past these
             litigation matters and disputes and does not make any admission of
             liability or wrongdoing.



    •     Modification of Mallinckrodt's Senior Secured Term Loans. Upon
          effectiveness of the Scheme and the Plan, lenders holding allowed claims
          in respect of Mallinckrodt's senior secured term loans due September 2024
          (the "2024 Term Loans") and its senior secured term loans due February
          2025 (the "2025 Term Loans") will receive either (1) their pro rata share
          of new senior secured term loans in an amount equal to the then-remaining
          principal amount of such claims bearing interest at a rate per annum
          equal to LIBOR plus 5.25% (with respect to the 2024 Term Loan) or LIBOR
          plus 5.50% (with respect to the 2025 Term Loan), maturing on the earlier
          of September 30, 2027 and 5.75 years after effectiveness of the Scheme
          and the Plan and without any financial maintenance covenant, and payment
          in cash of an exit fee equal to 1.00% of such remaining principal amount
          or (2) payment in full of such remaining principal amount in cash and
          payment in cash of an exit fee equal to 0.50% of such remaining principal
          amount.



    •     Repayment of the Mallinckrodt's Senior Secured Revolving Credit Facility.
          Upon effectiveness of the Scheme and the Plan, all allowed claims under
          Mallinckrodt's senior secured revolving credit facility will be paid in
          full in cash, principally with the proceeds of newly incurred debt.



    •     Reinstatement of Mallinckrodt's 10.00% First Lien Senior Secured Notes
          Due 2025. Upon effectiveness of the Scheme and the Plan, Mallinckrodt's
          first lien senior secured notes due 2025 will be reinstated at existing
          rates and maturities as the applicable holders' purported make-whole
          claims were disallowed.



    •     Modification of Mallinckrodt's 10.00% Second Lien Senior Secured Notes
          Due 2025. Upon effectiveness of the Scheme and the Plan, lenders holding
          allowed claims in respect of Mallinckrodt's 10.00% second lien senior
          secured notes due 2025 will receive their pro rata share of new 10.00%
          second lien senior secured notes due 2025 that will have the same
          principal amount and other economic terms as the existing second lien
          senior secured notes.



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    •     Restructuring of Mallinckrodt's Guaranteed Unsecured Notes. Upon
          effectiveness of the Scheme and the Plan, holders of allowed claims in
          respect of Mallinckrodt's 5.75% senior notes due 2022, 5.625% senior
          notes due 2023 and 5.50% senior notes due 2025 (the "Guaranteed Unsecured
          Notes") will receive their pro rata share of $375.0 million of new 10.00%
          second lien senior secured notes due seven years after effectiveness of
          the Scheme and the Plan and 100% of the new Mallinckrodt ordinary shares,
          subject to dilution by the warrants described above and Mallinckrodt's
          management incentive plan.



    •     Resolution of Other Remaining Claims. Pursuant to the Scheme, on the
          Effective Date, trade claims and other general unsecured claims,
          including the claims of the holders of the 4.75% senior notes due April
          2023, against Mallinckrodt are deemed to have been settled, discharged,
          waived, released and extinguished in full, and Mallinckrodt ceases to
          have any liability or obligation with respect to such claims, which are
          then treated in accordance with the Plan, which provides for the holders
          of such claims to share in $135.0 million in cash, plus other potential
          consideration, in accordance with the allocations as prescribed in the
          Plan.



    •     Cancellation of the Existing Shares. Pursuant to the Scheme, on the
          Effective Date the members of Mallinckrodt receive no distribution and
          all of the existing ordinary shares of Mallinckrodt and all rights
          attaching or relating thereto will be cancelled.

Notwithstanding the placing of the Order, the execution of the Plan remains subject to the satisfaction or waiver of various conditions precedent set out therein.

The above summary of plan and plan is not complete and is qualified in its entirety by reference to the plan and plan, which are filed as Exhibits 2.1 and 2.2 to this current Report on Form 8-K and incorporated in this point 1.03 by reference.

Capital structure

From April 29, 2022, Mallinckrodt had 84,782,926 common shares outstanding. On the Effective Date, in accordance with the Scheme, all then existing ordinary shares will be canceled and their holders will not receive any distribution in respect of such interest. There is no specific number of common shares of Mallinckrodt reserved for future issuance with respect to claims and interest filed and permitted under the Plan or Scheme, which provide that holders of the secured unsecured notes will receive all of the new ordinary shares to be issued by Mallinckrodt on the effective date (and for the issuance of the warrants described above and a new management incentive plan). The common stock issuable on the Effective Date will be issued on the basis of the exemption from the registration requirements of the Securities Act of 1933, as amended, provided by Section 1145 of the Bankruptcy Code.

Certain Information Regarding the Assets and Liabilities of Mallinckrodt

Information regarding Mallinckrodt’s assets and liabilities as of the latest possible date prior to the entry of the order is hereby incorporated by reference into Mallinckrodt’s Annual Report on Form 10-K for the period ended.
December 31, 2021filed with the Security and Exchange Commission (the “SEC”) on March 15, 2022. As indicated in Form 10-K, effective on December 31, 2021, . . .

Section 9.01. Financial statements and supporting documents.


  (d) Exhibits.



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Exhibit No.       Description of Exhibit

2.1                 Fourth Amended Joint Plan of Reorganization (with Technical
                  Modifications) of Mallinckrodt Plc and Its Debtor Affiliates
                  Under Chapter 11 of the Bankruptcy Code (included as Schedule 2
                  to the Order of the High Court of Ireland, dated as of April 27,
                  2022).

2.2                 Amended Proposals for a Scheme of Arrangement Between
                  Mallinckrodt Public Limited Company and Its Members and Creditors
                  (included as Schedule 1 to the Order of the High Court of
                  Ireland, dated as of April 27, 2022).

99.1                Order of the High Court of Ireland, dated as of April 27, 2022.


104               Cover Page Interactive Data File (embedded within the Inline XBRL
                  document).



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