Mallinckrodt Intl Finance SA: Begin Negotiations With Creditors

Apparently, controversial drug maker Mallinckrodt PLC has begun confidential discussions with its creditors. That didn’t stop “people familiar with the matter” calling up the Wall Street Journal and confiding the key elements of the company’s game plan. The Irish parent of the company is considering a bankruptcy filing for its U.S. generic drug business. That’s one potential element to find a solution to the liabilities associated with the numerous lawsuits faced relating to the opioid crisis. The BDC Credit Reporter last wrote about the subject on September 9, 2019. Even then bankruptcy was being mooted.

At the time of our last report, we surmised that the only BDC with exposure – Barings BDC or BBDC – would have to further discount its position when the IIIQ 2019 results were published. That’s just what happened, with the discount on the 2024 Term Loan being increased from (9%) to (25%), which was very close to our September 9 estimate.

We’ll be interested to see what happens when BBDC reports IVQ 2019 results. The discount already taken may be adequate at this stage. However, if the company does file for Chapter 11 – and we’re aware that there’s financial gamesmanship going on in these breathless anonymous confessions to the WSJ – income will be interrupted for the first time. On the other hand, for all we know BBDC has managed to extricate itself from what is going to be a very long and complex situation and what the ultimate resolution will be is impossible to pre-determine. We’ll find out more when those latest BBDC results come in.