Mallinckrodt PLC said it had tentatively agreed to a settlement package worth $30 million to resolve opioid-crisis lawsuits brought by two Ohio counties, allowing the drugmaker to avoid a landmark trial next month, the Wall Street Journal reported. The company said on Friday that it would pay $24 million in cash and provide $6 million worth of generic products, including those for addiction treatment, to Cuyahoga and Summit counties, home to cities including Cleveland and Akron. The counties are scheduled to go to trial against drugmakers and distributors next month in what is seen as a bellwether for allegations raised in some 2,000 lawsuits. Mallinckrodt still faces hundreds of other lawsuits, as do other manufacturers, retail pharmacies and wholesalers. The companies are accused by states, cities and counties of helping cause a public-health crisis with misleading marketing and by failing to stop excessive amounts of drugs from flooding the country. Mallinckrodt has denied the allegations.
PG&E Corp.’s preferred path out of bankruptcy protection relies partly on a new multibillion-dollar stockholder investment, but it’s still not clear exactly how much money the company wants to offer individual wildfire victims, the San Francisco Chronicle reported. More than 30 financial institutions have committed to investing upwards of $14 billion, according to a draft document obtained by the Chronicle that outlines the terms of PG&E’s plan to emerge from bankruptcy protection. The company and subsidiary Pacific Gas and Electric Co. intend to formally propose their plan by today. The document said that PG&E’s bankruptcy exit financing “is supported by a substantial infusion of cash raised from existing equity holders on market terms.” PG&E said it is on track to file its reorganization plan “on or before” Monday and is “looking at all options” while working with the governor, state regulators and others with a stake in the bankruptcy’s outcome. In addition to the infusion of cash, the company could also use debt to help pay fire victims and emerge from bankruptcy. Banks have “expressed high levels of confidence” that PG&E could secure $35 billion to $40 billion in debt and equity, according to the term sheet. Read more.
In related news, an effort by bankrupt utility giant PG&E Corp. to gain access to tax-free state bonds to help it pay for billions of dollars in wildfire liabilities has run aground in the California legislature, Bloomberg News reported. Lawmakers ran out of time to debate the measure, which would have let PG&E use future profits to finance up to $20 billion in bonds that would help cover damages tied to wildfires that its equipment ignited, according to the bill’s sponsor, Republican Assemblyman Chad Mayes. A group of PG&E shareholders plan to push for it to be reintroduced in January, their spokesman said. The San Francisco-based power company had left open the possibility that the bonds could be a significant piece of its restructuring, a draft term sheet obtained by Bloomberg News showed. The measure faced an uphill battle from the start. A group representing wildfire victims, Up From the Ashes, said it couldn’t support the bill unless PG&E reached a settlement with fire victims. Some lawmakers, consumer advocates and a powerful group of PG&E creditors, including Pacific Investment Management Co. and Elliott Management Corp., also opposed it. The group waged a lobbying campaign against the bill, calling it a “bailout” for PG&E’s shareholders. Read more.
Bankruptcy judges spurned requests for extra pay at PG&E Corp. and Insys Therapeutics Inc. in recent weeks—a rare restriction that reflects outrage over the damage from wildfires linked to the California utility’s equipment and the drugmaker’s role in the opioid crisis, WSJ Pro Bankruptcy reported. U.S. Bankruptcy Judge Dennis Montali last week in San Francisco turned down a proposal that would have added as much as $16 million to this year’s pay for a dozen top PG&E executives. The embattled California utility sought chapter 11 protection from claims for fire damages that could top $30 billion. A week earlier in Delaware, Judge Kevin Gross spurned a request from Insys to hand out severance pay after the drugmaker’s board of directors refused to certify that those on the receiving end hadn’t participated in the company’s criminal behavior. “In both of these decisions, bankruptcy judges are policing the edges of what debtors are allowed to do and promoting confidence in the bankruptcy system,” said Jared Ellias, professor at the University of California Hastings College of Law in San Francisco.
Mallinckrodt Plc yesterday downplayed a media report that the company had hired restructuring firms and may choose to seek bankruptcy protection, Reuters reported. The company will not specifically comment on what it called market speculation, Chief Executive Officer Mark Trudeau said, adding that “like any other company, we hire advisers for different types of things all the time.” Bloomberg reported on Wednesday that Mallinckrodt has hired law firm Latham & Watkins LLP and consulting firm AlixPartners LLP to help limit its potential legal liabilities from lawsuits related to the U.S. opioid crisis. The company’s shares fell as much as 44.8 percent to an all-time low of $1.43 yesterday. Opioid makers in the United States, including Mallinckrodt, face pressure from a crackdown on the addictive drug in the wake of the opioid crisis and as state attorneys general file lawsuits against manufacturers.
Facing more than 2,000 states, cities and counties that blame drug makers and distributors for an epidemic of addiction and tens of thousands of overdose deaths, Mallinckrodt Plc has hired restructuring advisers to help limit its potential legal liabilities, Bloomberg News reported. Drugmakers such as Mallinckrodt, Purdue Pharma LP and others are facing claims that they downplayed the addictive risks of their opioid pills and failed to monitor patterns of misuse. With their potential liability running into the tens of billions of dollars, some have raised the possibility of bankruptcy as a way to contain a likely legal payout. Ahead of the federal trial next month, Mallinckrodt is exploring options that could include a bankruptcy filing if its costs become unmanageable. The drugmaker has hired the law firm Latham & Watkins LLP and turnaround firm AlixPartners LLP to advise it. Mallinckrodt is burdened with $5 billion in debt, adding to the risk of a large legal judgment or settlement.
Court filings show that fees and related expenses for lawyers, bankers and restructuring experts advising PG&E and its creditors have added up to nearly $140 million since the company went bust in January, Bloomberg News reported. That’s more than $1 million for every weekday since the case began — an expense that potentially cuts into funds that would go to victims of wildfires started by PG&E’s equipment. Those liabilities are what forced PG&E into the biggest utility bankruptcy in U.S. history. If the company exits court protection as planned by June 2020, and bills keep piling up at the current pace, the total could surpass $400 million. “The numbers are eye-popping, but that’s just how much bankruptcy costs,” said Jared Ellias, a professor of bankruptcy law at the University of California Hastings. And that’s not counting the court fight over PG&E’s soon-to-be released reorganization plan, or the millions in adviser fees to get it through the California Public Utilities Commission.
Citing “the rare smoking gun,” a federal judge said investors may sue five big banks for conspiring to rig prices on hundreds of billions of dollars of bonds issued by mortgage financiers Fannie Mae and Freddie Mac over seven years, Reuters reported. U.S. District Judge Jed Rakoff issued a decision on Tuesday that said that investors can pursue antitrust claims against Bank of America Corp., BNP Paribas SA, Deutsche Bank AG, Goldman Sachs Group Inc. and Morgan Stanley. The judge said that chat room transcripts involving those banks’ traders were “direct evidence of a conspiracy to fix prices,” which investors said caused them to overpay for newly issued bonds between Jan. 1, 2009 and Jan. 1, 2016. “Here, we have the rare smoking gun,” Rakoff wrote. “The chats unmistakably show traders, acting on behalf of those defendants, agreeing to fix prices at a specific level before bringing the bonds to the secondary market.” Rakoff dismissed similar claims against 11 other financial services companies, but said that investors may amend those claims. The proposed class action is led by Pennsylvania Treasurer Joe Torsella, a Birmingham, Alabama public pension fund, and electrical workers’ retirement and health plans in Dorchester, Massachusetts. They sued after a report last year said the U.S. Department of Justice was investigating possible bond price-fixing.
OxyContin maker Purdue Pharma LP is preparing to seek bankruptcy protection before the end of the month if it does not reach a settlement with U.S. communities over widespread opioid litigation after some states balked at the company’s $10 billion to $12 billion offer in August to end their lawsuits as part of a negotiated chapter 11 case, Reuters reported. On Friday, Purdue lawyers had documents prepared for a chapter 11 filing at a moment’s notice. A federal judge, who expects plaintiffs to update him on settlement progress this week, wants 35 state attorneys general on board with a deal, a threshold that has not yet been reached. Purdue lawyers have told lead attorneys for local governments and some state attorneys general for weeks, and again in recent days, that the company will have to file for bankruptcy without a settlement if one is not reached soon. This approach is known as a “free-fall” bankruptcy filing because it lacks consensus on a reorganization beforehand. Strong opposition from some attorneys general such as those in Massachusetts and New York emerged last week after confidential discussions on Purdue’s settlement talks became public in media reports, with Connecticut’s calling for Purdue to be “broken up and shut down,” and sold in parts. Purdue faces more than 2,000 lawsuits from cities, counties and states alleging it helped fuel the U.S. opioid epidemic, and Reuters reported in March that the company and family began exploring bankruptcy options for Purdue to halt lawsuits and attempt to resolve litigation with plaintiffs rather than fight every single case.
The judge in the PG&E bankruptcy case rejected the company’s plan to hand out up to $16 million in executive bonuses this year, saying he saw no basis to give up to a dozen executives more money to “do what they should already be doing” in bolstering safety and preventing wildfires, NBCBayArea.com reported. Bankruptcy Judge Dennis Montali found the company failed to show the bonuses, as proposed, would add anything to improve safety, noting that the company routinely handed out bonuses for the last decade — even in the last two years of devastating wildfires. PG&E had argued that its plan properly factored in both safety and financial performance and was necessary to retain leaders during the turmoil and keep their salaries in line with other utilities. It said that it would not guarantee bonuses, that they would range from a low of $5 million to a high of $16 million, depending on whether the executives met set goals.
But Montali said in a ruling issued on Friday that he could not see any direct link in the plan and safety. "It appears that the metrics are at least partially what some would call a ‘lay-up’," the judge said, noting even PG&E acknowledged it awarded bonuses for meeting goals every year during the last decade — even during the two years of devastating wildfires.
Ohio Attorney General Dave Yost has asked a federal appeals court to halt an upcoming bellwether trial over the opioid crisis that he called “legally flawed” and “strikes at our Republic’s core structure,” Law.com reported. In a petition for writ of mandamus filed on Friday before the U.S. Court of Appeals for the Sixth Circuit, the attorney general argued that the two Ohio counties serving as plaintiffs in the Oct. 21 trial have no legal authority to seek relief from the opioid crisis on behalf of Ohio’s residents. The trial, scheduled to take place in Cleveland, is the first bellwether in the multidistrict litigation and follows a $572 million judgment for the state of Oklahoma in the first opioid trial in the nation. The writ asks the Sixth Circuit to halt or delay the trial until the state of Ohio concludes two separate lawsuits it filed in 2017 and 2018 against several of the same opioid manufacturers and distributors. The trial is between the counties of Cuyahoga and Summit against more than 20 defendants, including manufacturers Purdue Pharma and Johnson & Johnson, and distributors such as McKesson Corp. and AmerisourceBergen Drug Corp. The two counties are asking for $8 billion. On Aug. 20, one of the defendants, Endo International, agreed to pay $10 million to settle the claims of the Ohio counties, and on Friday another, Allergan, agreed to pay $5 million. The state of Ohio highlighted those settlements in its writ as an affront to state sovereignty. Read more.
In related news, the Sackler family, which grew into one of the nation’s wealthiest dynasties through sales of the widely abused painkiller OxyContin, could emerge from a legal settlement under negotiation with its personal fortunes largely intact, the Washington Post reported. Under a plan to relinquish control of their company, Purdue Pharma, and resurrect it as a trust whose main purpose would be to combat the opioid epidemic, the Sacklers could raise most, if not all, of their personal share of the $10 billion to $12 billion agreement by selling their international drug conglomerate, Mundipharma, according to the documents and those close to the talks. Yet the proposed settlement — built on the projected value of drugs not yet on the market — offers gains for both sides if the company and more than 2,000 cities, counties, states and others that have sued Purdue and the family can craft a deal. The Stamford-Conn.-based Purdue Pharma would go into bankruptcy, and the Sacklers would be out of the drug business. They would be required to contribute $3 billion and possibly more, depending on the sale price of Mundipharma, their international drug company, over seven years. Read more.
