A stand-off between drugmaker Mallinckrodt, the Dublin-based but US-run drugmaker, and a small group of dissident shareholders, claiming their rights are being suppressed as the company goes through a restructuring in bankruptcy, is on track to be aired before the High Court in Dublin later this year.
While Mallinckrodt opted last October to file for bankruptcy in Delaware as the company, with $5.3 billion (€4.5 billion)in long-term debt, was overwhelmed by lawsuits accusing it of deceptively marketing opioids, the completion of the overhaul will require the filing of an examinership case in the Republic.
The company is pursuing a US court-supervised reorganisation that would set up a $1.6 billion trust to resolve opioid-related claims with states, local governments and private individuals. The plan, supported by certain creditors and subject to broader votes by early September, would see unsecured bondholders take control of the company, some $1.3 billion of debt being eliminated, and general unsecured creditors split $150 million in cash.
New York-based asset management firm Buxton Helmsley, which is leading a group of investors that own about 5.6 per cent of Mallinckrodt, has claimed that it has been thwarted by Mallinckrodt and the Delaware court as it sought a seat at the negotiating table on the drugmaker's restructuring.
Objection
Mallinckrodt successfully filed an objection in late 2020 against the formation of an official committee for existing shareholders, and also secured an order from the Delaware court in April which effectively bans Buxton Helmsley, led by Alexander Parker, from taking a number of actions. These include using its shares to call an extraordinary general meeting, put forward resolutions at the company's annual general meeting in Dublin on August 13th, or taking legal action without the US court's approval.
Mr Parker has sent a number of letters to the board and other parties since the order in April, making a series of allegations, including one of shareholder suppression, and saying that he should be entitled to take action through the High Court in Dublin under Irish companies law.
Mr Parker said in a letter to Mallinckrodt’s board, dated May 20th, that while he “will abide by my gag order not to call a shareholder meeting, conduct a proxy contest, or anything else you have muzzled Buxton from doing during the US reorganisation proceedings”, he intends to bring his issues before the High Court in Dublin later this year, when the drugmaker files for examinership. He repeated the assertion in another letter, dated July 7th, also seen by The Irish Times.
Equity
Buxton Helmsley alleges that the interests of top executive and directors of Mallinckrodt are not aligned with shareholders in protecting equity, as none of them currently holds enough shares to meet stock retention requirements. He claims that the planned allocation of a 10 per cent stake to management following the restructuring represents a conflict of interest. Still, the make-up of the management team post-restructuring has not yet been confirmed.
A spokesman for Mallinckrodt said that the Delaware court has already determined that the company is insolvent, “such that existing shareholders cannot expect any recovery”.
“The proposed reorganisation plan envisages an examinership process subject to Irish court approval, and it will be a matter for the Irish courts to determine the appropriate orders to be made in respect of that process,” he said. “Mallinckrodt is confident its actions comply fully with US and Irish law.”
