The High Court confirmed an examiner’s scheme of arrangement for Mallinckrodt plc on 27 April 2022, despite a number of conditions to the wider restructuring remaining unresolved. The scheme will take effect only when the conditions for the US Chapter 11 plan have been satisfied or waived. The matter was listed for mention on 13 May, with the examiner given liberty to apply if difficulties arose.
Mr Justice Quinn ruled on an application by examiner Michael McAteer under section 541(3) of the Companies Act 2014. He found the proposals fair and equitable and not unfairly prejudicial to any interested party. The confirmation order did not itself make the scheme effective: its effect was tied to consummation of the Chapter 11 plan.
Avon Holdings LLC and Attestor Limited, described in the judgment as the Acthar Claimants, were the only parties opposing confirmation. They argued that unsecured creditors with claims of similar rank could receive different returns because the plan allocated them to separate funds, or “pots”. They had appealed rulings by the US Bankruptcy Court concerning their claims and the plan, but did not present evidence or legal submissions at the Irish hearing.
The judge considered the US court’s analysis of the plan, including creditor classification, alongside the examiner’s evidence and the Irish statutory test. He said the Irish court had to assess fairness rather than simply rubber-stamp the US decision, but it would not be appropriate to repeat the extensive hearing held in Delaware on substantially the same plan issues. He accepted that different origins of claims, and claims against different companies in the group, could justify different treatment where there was a rational basis.
The examiner’s report said 25 creditor classes voted in favour of the proposals and three did not; among impaired classes, 23 voted in favour and two did not. It also said the group employed about 2,890 people internationally, including about 116 employed by Irish subsidiaries. The examiner’s liquidation analysis estimated that a winding-up would leave no dividend for unsecured creditors. The judge accepted the evidence that the restructuring offered a better outcome for creditors and could preserve employment.
The proposed restructuring included cancellation of existing shares, which would receive no distribution, and issuance of new shares. It also provided for creditor recoveries through different arrangements, including opioid-related trusts funded with $1.725 billion over seven years. These were terms of the proposed restructuring, not findings that payments had already been made.
The court acknowledged that conditions remained outstanding, including matters involving opioid trust documents and cooperation. It refused to delay confirmation, concluding that delay could put the restructuring at risk and cause greater prejudice to stakeholders overall. The order confirmed the version of the proposals exhibited to the examiner’s affidavit sworn on 21 April 2022, including the proposed new constitution. The scheme would bind parties only if and when its effective-date conditions were met.