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Drugmaker Mallinckrodt PLC has obtained support among unsecured bondholders to fund its exit from chapter 11 after a chilly reception from the leveraged credit market, WSJ Pro Bankruptcy reported. The Ireland-based company had been struggling to complete a financing deal needed to emerge from bankruptcy and has been working with Morgan Stanley to find investors. A $900 million loan deal failed to gain traction with market participants, partly due to concerns about investing in a company linked to opioid production amid growing market sensitivity about environmental, social and governance issues. Mallinckrodt has since downsized the deal offering to $650 million and shifted its structure into a bond, rather than a loan, in the hopes of finding hedge funds that might have an easier time investing. The company has secured commitments for the deal from a group of existing creditors. The deal struggles follow a broader selloff in the leveraged credit market in recent weeks that has brought junk-rated bonds and loans under pressure, and pushed at least one company, Dayco Products LLC, to pull a refinancing deal. A nearly $3.3 billion bond issued by Carvana Co., the online used-car dealer, with help from Apollo Global Management Inc. has traded down substantially since. Mallinckrodt has been working to emerge from bankruptcy under a negotiated restructuring to trim roughly $1.3 billion in debt from its balance sheet. The company filed for chapter 11 protection in 2020 to address ballooning liabilities related to its production of opioids and antitrust claims around its flagship H.P. Acthar gel product.

Attorneys for the state of West Virginia and two remaining pharmaceutical manufacturers have reached a tentative $161.5 million settlement just as closing arguments were set to begin in a seven-week trial over the opioid epidemic, Attorney General Patrick Morrisey said yesterday. Morrisey announced the development in court in the state’s lawsuit against Teva Pharmaceuticals Inc., AbbVie’s Allergan and their family of companies. The judge agreed to put the trial on hold to give the parties the opportunity to reach a full settlement agreement in the upcoming weeks. “We are very optimistic that we can do so,” Morrisey said. The trial started on April 4. The lawsuit accused the defendants of downplaying the risks of addiction associated with opioid use while overstating the benefits. Under the tentative deal, West Virginia would receive more than $134.5 million in cash, while Teva would supply the state with $27 million worth of Narcan, a medication that can reverse opioid overdoses, restore breathing and bringing someone back to consciousness. West Virginia had reached a $99 million settlement with drugmaker Johnson & Johnson’s subsidiary Janssen Pharmaceuticals Inc. last month over the drugmaker’s role in perpetuating the opioid crisis in the state that has long led the nation in drug overdose deaths.

A Florida doctor and a former sales representative at Insys Therapeutics Inc. have been convicted of conspiring to pay and receive $278,000 in kickbacks and bribes in exchange for prescribing the drugmaker's addictive fentanyl spray. A federal jury in Tampa, Florida, on Tuesday found Dr. Steven Chun and Daniel Tondre guilty of conspiracy and kickback charges in the latest trial to result from a scandal that led to Insys' 2019 bankruptcy and the conviction of top executives. The two are among more than 40 doctors and former executives and employees of now-defunct Chandler, Arizona-based Insys who have faced charges over a scheme centered on Subsys, an opioid medication approved for treating severe pain in cancer patients. Prosecutors said Insys, before filing for bankruptcy in 2019, paid doctors kickbacks by arranging for them to participate in "sham" speaker programs ostensibly meant to educate medical professionals about Subsys. Over the course of a 10-day trial, prosecutors said they presented evidence that Chun received more than $278,000 in illegal kickbacks and bribes from Insys in connection with sham speaker programs that Tondre helped arrange.

After strongly indicating that he would rule against the Roman Catholic Diocese of Rochester’s bid to stop sexual-abuse survivors from going after parishes and other diocese affiliates in state court lawsuits, Bankruptcy Court Judge Paul Warren yesterday denied the diocese’s request to reimpose a freeze on state court actions against priests and other church officials, the Rochester Beacon reported. Some 300 such actions accusing Rochester diocese parish priests and other church officials of sexually abusing children decades ago had been put on hold for some two years under a pact between the diocese and abuse survivors early in the diocese’s chapter 11 bankruptcy. The diocese filed the bankruptcy petition in September 2019. The formerly frozen state court actions and the diocese’s bid for court protection came as a result of New York’s passage of the Child Victims Act. The CVA temporarily lifted a seven-year statute of limitations on sexual abuse. The law prompted thousands of adults who had been molested as children but had not gone after their abusers at the time a chance to pursue their abusers. The agreement to freeze the state court cases unraveled in late March as abuse survivors’ patience with the bankruptcy’s glacial pace wore thin and the creditors committee declined to renew the pact. The diocese’s attempt to have the freeze involuntarily reimposed did not sit well with the more than 400 abuse survivors with claims in the bankruptcy.

The Roman Catholic Diocese of Rochester (N.Y.) has put forward a $147.75 million offer to settle claims filed by 475 sexual-abuse survivors in the diocese’s chapter 11 bankruptcy, the Rochester Beacon reported. Whether the nine-figure offer will bring a quick end to the long-stalled bankruptcy at this point seems far from certain. The offer was outlined in a filing posted with the bankruptcy court late Friday afternoon. In court papers, the diocese portrays the offer as a deal that would best serve the abuse victims “by achieving certainty with respect to a very substantial insurance contribution rather than risking the cost, extensive delay, and uncertain outcome of litigation in pursuit of the theoretical possibility of a larger recovery at some point in the distant future.” The Rochester diocese filed bankruptcy in September 2019, roughly a month after the New York Child Victims Act went into effect. Signed into law in February of that year, the CVA temporarily lifted a seven-year statute of limitations on sexual-abuse claims. That opened a roughly two-year window for adults who had been sexually abused as children decades ago and failed to press claims then to go after their alleged abusers. Under the CVA, more than 300 individuals have filed state court complaints accusing Rochester diocese priests and other church officials. Four hundred seventy-five people have filed claims seeking compensation for alleged sexual abuse in the Rochester diocese’s chapter 11. Terms proposed by the diocese’s settlement offer would see its insurance carriers contribute $107.25 million to a fund to pay abuse survivors. The diocese and its parishes would contribute $40.5 million to the fund.

The United States is objecting to a Johnson & Johnson subsidiary’s bid to add Hogan Lovells partner Neal Katyal to its legal team in a high-stakes bankruptcy case, citing his hourly rate of $2,465 — a possible new legal industry high, Reuters reported. Johnson & Johnson is using the proceedings to try to resolve claims that its baby powder and other talc-based products caused cancer. The company, which maintains the products are safe, in October assigned thousands of talc lawsuits to a new subsidiary, LTL Management LLC, and placed it in bankruptcy. The U.S. trustee in the chapter 11 case on Friday asked a federal bankruptcy judge in New Jersey to block LTL from retaining Katyal, calling his hourly rate “significantly higher” than that of partners from the seven other law firms already involved in the case. LTL asked the judge for approval to add Katyal to its legal team earlier this month, citing his and Hogan Lovells' expertise in federal appeals. Multiple talc claimants have appealed the February ruling that allowed LTL's bankruptcy to move forward.

Wasim Rehman is a go-to person for investors desperate for an exit in the messy world of trading troubled, hard-to-sell assets — a sector that’s set to explode as sanctions against Russia and the ongoing equities meltdown create mountains of illiquid holdings. But Rehman — who has invested in more than 200 funds in liquidations in the 13 years since retiring at age 28 as the youngest partner of hedge fund giant Marshall Wace — has a message for those tempted by the steep discounts of so-called side-pockets that money managers create to separate out their problem bets: Sometimes it takes more than just patience, Bloomberg News reported. Take his 2014 purchase of claims tied to fraudster Bernie Madoff, mastermind of the biggest financial con job in history. The drawn-out effort to unwind that investment forced Rehman, one of the biggest players in the secretive world of side-pockets, to come out of the shadows, turn activist against the executives responsible for liquidating the assets and even prepare to take his battle to the courts. Rehman says it could still take years before he turns a profit on his bet.

Questions remain about the pension funds of Colstrip employees as Colstrip operator and co-owner Talen Montana enters bankruptcy, the Billings Gazette reported. Talen Montana, in a lawsuit separate from its May 9 bankruptcy filing, says it’s still owed hundreds of millions of dollars from Talen’s Colstrip predecessor, PPL, and lacks adequate funds to cover pension and environmental remediation obligations. The lawsuit reiterates claims first made in a 2018 class action lawsuit filed by the Talen Montana Retirement Plan and Talen Energy Marketing in Rosebud County. The pension fund isn't fully financed, Talen confirmed Wednesday, though it expects it will be by 2025. Talen claims that PPL wrongfully took $733 million of the net proceeds from the sale of its Montana hydroelectric dams before spinning off its coal power properties to Talen Montana in 2015. PPL sold its Montana hydroelectric dams to NorthWestern Energy in 2014.