The High Court appointed an examiner to Mallinckrodt plc after finding that the company could not pay its debts and that it and at least part of its undertaking had a reasonable prospect of survival as a going concern. The ruling, delivered by Mr Justice Quinn on 22 March 2022, concerned the appointment stage of the examinership process; it did not approve the proposed scheme of arrangement.
The company’s directors petitioned for an examiner on 14 February 2022. Michael McAteer of Grant Thornton had been appointed interim examiner that day. The court heard the petition on 28 February. No party opposed the appointment, though some creditors and claimants supported it while others reserved their positions or remained neutral.
Mallinckrodt is an Irish registered parent company of a multinational pharmaceutical group. The judgment said the group faced more than 3,000 opioid related cases in the United States, alongside Acthar related litigation. The claims included allegations about opioid sales and marketing and Acthar pricing and competition. Mallinckrodt’s petitioners said the group had meritorious defences, but argued the cost and uncertainty of the litigation, together with financial debt, had driven the restructuring.
The company had guaranteed substantially all of the group’s financial indebtedness, which the judgment put at almost $5.2 billion. Those guarantee obligations had crystallised following the group’s Chapter 11 filing in the United States in October 2020, though enforcement was postponed by the US proceedings. On a standalone basis, Mallinckrodt had a net asset deficiency of $162.2 million as of 31 December 2021.
The proposed restructuring was linked to a US Chapter 11 plan approved by the Delaware bankruptcy court on 3 February 2022. An appeal had been filed. The Irish petition included a draft scheme intended to implement parts of that plan, including cancellation of existing shares and issue of new shares. The court said the Irish scheme would require separate consideration and confirmation under section 541 of the Companies Act 2014.
Mr Justice Quinn relied on evidence from the company’s chief transformation officer and an independent expert, who considered the company’s operational role and prospects following restructuring. The judge also considered the US court’s feasibility findings and the interim examiner’s report. He emphasised that an examiner must independently examine the company’s affairs and formulate or recommend proposals, even where restructuring work is already advanced.
Avon Holdings I LLC and Attestor Limited, whose counsel said they had Acthar related claims, did not oppose appointing an examiner but reserved the right to object to a future scheme. Their stated claims included $6.2 billion in pre-petition claims and $265 million in administrative claims; the judgment noted that US court rulings against those claims were under appeal.
The High Court concluded that examinership and a scheme, alongside the Chapter 11 plan, were likely to produce a better outcome for creditors than winding up. It confirmed the examiner’s appointment. The ruling did not determine the merits of any eventual scheme or resolve the pending appeals.