Opioid claimants will now see their $1.7 billion settlement fund established through Mallinckrodt’s first bankruptcy slashed to $700 million as a result of the flawed financial forecasts embedded in the company’s prior restructuring plan, which faced little formal pushback in court.
The proposed reduction in settlement funds will be “devastating” to opioid claimants, said Joseph Steinfeld, an opioid victim lawyer with ASK LLP.
The company’s Chapter 11 filing on Monday comes slightly more than a year after it emerged from its first bankruptcy with a deal resolving litigation from individuals and state and local governments that accused it of contributing to the national opioid crisis.
The first bankruptcy was supposed to be final. All corporate debtors are required to show a judge they can meet the obligations of their restructuring plans and are unlikely to restructure again, a standard known as “feasibility.” The bankruptcy code says a plan can be confirmed if it is “not likely” to be followed by further restructuring or liquidation.
Still, Chapter 11 refilings are