Mallinckrodt files for Chapter 11 bankruptcy protection

BY Richard Summerfield

Specialist pharmaceutical company Mallinckrodt plc, including several of its subsidiaries, has filed for voluntary prepackaged Chapter 11 proceedings in the US Bankruptcy Court for the District of Delaware.

The filing, Mallinckrodt’s second bankruptcy proceeding in three years, will see the company cut $1bn from what it owes to victims of the US opioid crisis. The company’s restructuring plan will hand ownership to its lenders in exchange for a $1.9bn reduction in debt and would wipe out existing equity shares.

The company originally filed for Chapter 11 in 2020 to address its high debt load, litigation over its marketing of highly addictive generic opioids and disputes over its drug pricing. Its original restructuring plan saw the company, which denied any wrongdoing, agree to pay $1.7bn to settle around 3000 lawsuits alleging it used deceptive marketing tactics to boost opioid sales.

However, declining sales for its key branded drugs, including its most valuable drug, Acthar Gel, left Mallinckrodt unable to manage scheduled payments. In June, the company missed a $200m payment, a move which began negotiations around a second bankruptcy filing. To date, Mallinckrodt has only made one payment of $450m under the original agreement.

The company expects to exit its latest bankruptcy in the fourth quarter of 2023 with the support of its key stakeholders. If the court approves the restructuring, Mallinckrodt will have more than $450m in available liquidity, including $250m in new credit and its existing cash.

The plan, if it wins approval, will cancel the majority of the $1.25bn that Mallinckrodt still owes under the original settlement agreement, in exchange for a final payment of $250m.

“We are moving forward with the anticipated next steps for our financial restructuring plan and appreciate the significant support of our key stakeholders to reach this milestone,” said Siggi Olafsson, president and chief executive of Mallinckrodt. “Implementing this agreement will meaningfully enhance Mallinckrodt’s financial foundation and better position the business for the future. We expect to complete this process on an expedited basis and emerge as a stronger organization that will continue to help improve outcomes for patients with severe and critical conditions.

“I would like to thank the Mallinckrodt team for their resilience and dedication to our company’s mission. We also thank our customers, vendors, suppliers and other partners for their ongoing support as we work together to meet our patients’ needs. As we move forward, we are continuing to deliver the important therapies that patients depend on us to provide,” he added.

News: Mallinckrodt Goes Bankrupt Amid Debt-Cut Plan, Opioid Deal

Yellow Corporation files for Chapter 11 bankruptcy protection

BY Richard Summerfield

As it begins to wind down its near 100-year business, Yellow Corporation and a number of its subsidiaries have filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware.

“It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business,” said Darren Hawkins, chief executive of Yellow, in a statement regarding the filing. “Today, it is not common for someone to work at one company for 20, 30, or even 40 years, yet many at Yellow did. For generations, Yellow provided hundreds of thousands of Americans with solid, good-paying jobs and fulfilling careers.”

“All workers and employers should take note of our experience with the International Brotherhood of Teamsters (“IBT”) and worry,” he added. “We faced nine months of union intransigence, bullying and deliberately destructive tactics. A company has the right to manage its own operations, but as we have experienced, IBT leadership was able to halt our business plan, literally driving our company out of business, despite every effort to work with them.”

At the end of July, the company halted operations and announced it was laying off all 30,000 of its workers. It expects to reach an agreement with its creditors, pending approval from the court, that will allow it to pay certain wages and benefits, as well as some obligations to vendors and suppliers. The company disclosed a long list of creditors in its court filing, with Amazon, Home Depot and Goodyear Tire & Rubber Company among the top 30 with unsecured claims.

Yellow has been a significant actor in the shipping space. Indeed, it was one of the dominant carriers in a segment of trucking known as ‘less-than-truckload’ (LTL) - moving pallet-sized shipments of freight. However, by 2022 the company handled only about 7 percent of the 720,000 daily LTL shipments in the US, according to trucking consultant SJ Consulting Group.

While Yellow’s bankruptcy and closure is detrimental to the shipping industry, it also has a negative impact on the American taxpayer. During the coronavirus (COVID-19) pandemic, the company received a $700m loan from the federal government, a loan that resulted in taxpayers holding 30 percent of the company’s outstanding stock. And the company still owed the Treasury department more than $700m according to its most recently quarterly report, nearly half of the long-term debt on its books. The company had about $1.5bn in long-term debt on its balance sheet in its most recent financial report. The government loan is due in September 2024. But the company was in financial trouble long before the pandemic, with poor management and strategic decisions dating back decades often cited as causes for its difficulties.

News: Trucking giant Yellow Corp. declares bankruptcy after years of financial struggles

Cineworld exits Chapter 11 bankruptcy protection

BY Richard Summerfield

After nearly 11 months, Cineworld Group has exited Chapter 11 bankruptcy protection in the US. The company is emerging with a greatly reduced debt load, a new board of directors and a number of new executives.

The company has reduced its debt by $4.53bn, raising about $800m in new equity capital and securing new debt financing of around $1.71bn. As a result, it feels it is “well-positioned to pursue future strategic initiatives and continue providing leading cinematic experiences for customers globally, including through investments in new screen formats and enhancements to its flagship theatres”, according to a statement.

“With a transformed balance sheet and a right-sized capital structure, Cineworld is ready and fully able to succeed in this dynamic and constantly changing movie theatre industry,” said Eric Foss, the new chairman of the board of Cineworld. “I am truly excited to introduce the impressive group of directors who will be joining our new Board and whose expertise and leadership in various fields will help us to grow Cineworld’s business and ensure that our theatres continue to be moviegoers’ first choice for memorable cinema experiences.”

“I am honored to join Cineworld and work alongside the experienced management team to unlock the company’s great potential,” said Eduardo Acuna, the new chief executive of Cineworld. “With its talented group of employees, significant number of distinguished business partners and devoted customers around the world, Cineworld has what it needs to reach new levels of success. We will continue to put our guests at the center of everything we do and look forward to continuing to break new ground in our industry.”

In addition to Mr Foss and Mr Acuna, Cineworld has also appointed Ann Sarnoff, former chair and chief executive of Warner Bros, to its board, as well as four other new board members.

Cineworld is the world’s second largest cinema chain, and is the operator and owner of brands such as Regal, Cinema City, Picturehouse and Planet. The company and 104 of its affiliated debtors filed for Chapter 11 bankruptcy in the US Bankruptcy Court for the Southern District of Texas in early September 2022 to restructure its massive debt. The company’s existing shareholders have been wiped out as part of the financial restructuring, with a new, incorporated company controlled by lenders now controlling Cineworld.

On Monday, Cineworld Group named an administrator in the UK and had its shares delisted from the London Stock Exchange as the company prepared its Chapter 11 exit.

News: Cineworld emerges from Chapter 11 bankruptcy

Agri-business AppHarvest files for Chapter 11

BY Fraser Tennant

In what it describes as a “financial and operational transition”, sustainable food company AppHarvest, Inc. has filed for Chapter 11 bankruptcy protection in a bid to it to reduce its outstanding liabilities.

The company has also obtained a commitment from Equilibrium – its largest secured creditor – to provide approximately $30m of debtor-in-possession (DIP) financing to provide the necessary liquidity to support operations during the Chapter 11 process. The DIP financing is subject to approval by the bankruptcy court.

AppHarvest currently has four facilities in Kentucky – a 60-acre flagship tomato farm in Morehead, a 15-acre salad green farm in Berea, a tomato farm in Richmond and a 30-acre farm in Somerset – that grow tomatoes, leafy greens, cucumbers and strawberries.

Business operations will continue at the farms throughout the Chapter 11 process, including shipping product to top national grocery store chains, restaurants and food service outlets.

“The AppHarvest board of directors and executive leadership evaluated several strategic alternatives to maximise value for all stakeholders prior to the Chapter 11 filing,” said Tony Martin, chief executive of AppHarvest. “The filing provides protection while we work to transition operation of our strategic plan, Project New Leaf, which has shown strong progress toward operational efficiencies resulting in higher sales, cost savings and product quality.”

Developing and operating some of the world’s largest high-tech indoor farms with high levels of automation, AppHarvest’s farms are designed to grow produce using sunshine, rainwater and up to 90 percent less water than open-field growing, all while producing yields up to 30 times that of traditional agriculture and preventing pollution from agricultural runoff.

The company went public via a special purpose acquisition company (SPAC) in early 2021 and planned to operate 12 indoor farming facilities by 2025.

AppHarvest’s Chapter 11 filing comes just weeks after fellow indoor agri-tech business AeroFarms filed its own Chapter 11 petition.

News: AppHarvest files for Chapter 11 bankruptcy, aiming for financial and operational transition

ViewRay files for Chapter 11 protection

BY Richard Summerfield

ViewRay Inc., has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware. The company’s filing, which came on Tuesday, saw it further disclose that it intends to pursue a sale of its business under section 363 of the Bankruptcy Code, including a sale of all or a portion of the company’s assets, while continuing to support its customers during the Chapter 11 process.

To facilitate the Chapter 11 filing, in addition to having the use of its sufficient existing cash reserves, the company has received a commitment of around $6m in debtor-in-possession (DIP) financing from MidCap Financial Services.

The company has appointed Paul Ziegler as its chief executive. Mr Ziegler, who had previously served as the chief commercial officer (CCO) of the company, has also been appointed to the board as a director. The board also decreased from nine to seven directors. Prior to the Chapter 11 filing, the company terminated its then-CEO, its interim chief financial officer and chief legal officer.

ViewRay developed the MRIdian radiation-therapy system, the ‘world’s first’ radiation therapy system integrated with diagnostic-quality MRI guidance.

“Despite the operating challenges, MRIdian has facilitated real societal value and remains critically important for a broad population of cancer patients, including those who were previously considered untreatable,” said Mr Ziegler in a statement. “We deeply appreciate our teammates, customers, partners, and patients that we serve. We will continue to work diligently to maximize value for the benefit of all stakeholders.”

ViewRay has endured some financial difficulty in recent years. Hit by inflation, supply chain challenges and inconsistent payments from international customers, the company has fallen on hard times. As of 31 March 2023, ViewRay had an order backlog of $411m and recorded adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) losses of $25m in the first quarter of 2023. The company currently intends to lay off 71 employees, in addition to the 36 it let go earlier in 2023. ViewRay currently has 232 remaining employees.

Going forward, ViewRay has vowed to continue “strategically managing” its inventory to help maintain customer sites across the globe. It has also filed several motions in bankruptcy court with the intent of continuing to service customers and honour obligations to remaining employees “following an additional reduction in force”.

News: ViewRay Files Voluntary Chapter 11 Petitions