A confrontation between drug maker Mallinckrodt, the Dublin-based but US-run drug maker, and a small group of renegade shareholders who claim their rights are suppressed as the company goes bankrupt is set to appear in the Dublin High Court later this year.
While Mallinckrodt decided last October to file for bankruptcy in Delaware as the company had a $ 5.3 billion long-term debt on an audit case in the republic.
The company is pursuing a US court-overseen reorganization that would set up a $ 1.6 billion trust fund to resolve opioid-related claims with states, local governments, and individuals. The plan, which is backed by certain creditors and subject to broader voting through early September, sees unsecured bondholders take control of the company, shedding approximately $ 1.3 billion in debt, and bringing general unsecured creditors $ 150 million in be divided in cash.
New York-based asset management company Buxton Helmsley, which leads a group of investors who own approximately 5.6 percent of Mallinckrodt, has alleged that it was thwarted by Mallinckrodt and the Delaware Court when they got a seat at the negotiating table of the restructuring of the Drug manufacturer.
Mallinckrodt successfully appealed the formation of an official committee for existing shareholders in late 2020 and also obtained an order from the Delaware court in April that effectively forbids Buxton Helmsley, under the leadership of Alexander Parker, from taking a number of measures. These include calling an extraordinary general meeting with their shares, submitting resolutions to the company’s annual general meeting in Dublin on August 13, or bringing an action without the consent of the US court.
Mr Parker has sent a number of letters to the board of directors and other parties since the April order, making a number of allegations, including one of shareholder repression, saying he should be eligible to appear in the High Court bring legal action in Dublin under company law.
Mr. Parker said in a letter to Mallinckrodt’s board of directors dated May 20 that while he will adhere to my gag order not to convene a stockholders’ meeting, or litigate, or anything that you prohibited Buxton during the US reorganization process, ” bring his affairs to the Dublin High Court later this year if the drugmaker files for review. He repeated the claim in another letter dated July 7, which was also viewed by The Irish Times.
Buxton Helmsley claims that the interests of Mallinckrodt’s top management and directors in protecting equity are inconsistent with shareholders as none of them currently hold enough shares to meet stock custody requirements. The planned allocation of 10 percent to management after the restructuring represents a conflict of interest. However, the composition of the management team after the restructuring has not yet been determined.
A Mallinckrodt spokesman said the Delaware court had already determined that the company was insolvent “so existing shareholders cannot expect a recovery.”
“The proposed reorganization plan provides for a review process that is subject to the approval of the Irish court and it will be for the Irish courts to make the appropriate arrangements in relation to that process,” he said. “Mallinckrodt is confident that his actions are fully compliant with US and Irish law.”