XML 20 R10.htm IDEA: XBRL DOCUMENT v3.22.2.2
Fresh-Start Accounting
 9 Months Ended
Sep. 30, 2022
Reorganizations [Abstract]  
Fresh-Start Accounting
2.Emergence from Voluntary Reorganization
During the pendency of the Chapter 11 Cases, the Debtors operated their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As debtors-in-possession, the Debtors were authorized to continue to operate as ongoing businesses, and were allowed to pay all debts and honor all obligations arising in the ordinary course of their businesses after the Petition Date. However, the Debtors were not allowed to pay third-party claims or creditors on account of obligations arising before the Petition Date or engage in transactions outside the ordinary course of business without approval of the Bankruptcy Court.
Under the Bankruptcy Code, third-party actions to collect pre-petition indebtedness owed by the Debtors, as well as most litigation pending against the Company as of the Petition Date, were subject to an automatic stay. See Plan of Reorganization section below for the distributions to creditors and interest holders.
Plan of Reorganization
In accordance with the effectuated Plan, the following significant transactions occurred upon the Company's emergence from bankruptcy on the Effective Date:
Resolution of Opioid-Related Claims
Pursuant to the Plan and the Scheme of Arrangement, on the Effective Date all opioid claims against the Company and its subsidiaries were deemed to have been settled, discharged, waived, released and extinguished in full against the Company and its subsidiaries, and the Company and its subsidiaries ceased to have any liability or obligation with respect to such claims, which were treated in accordance with the Plan as follows:
◦Opioid claims were channeled to certain trusts, which will receive $1,725.0 million in deferred payments from the Company and certain of its subsidiaries (the "Opioid-Related Litigation Settlement") consisting of (i) a $450.0 million payment that was made upon the Effective Date (of which $2.6 million was prefunded); (ii) a $200.0 million payment upon each of the first and second anniversaries of the Effective Date; (iii) a $150.0 million payment upon each of the third through seventh anniversaries of the Effective Date; and (iv) a $125.0 million payment upon the eighth anniversary of Effective Date (collectively, the "Opioid Deferred Payments") with the Company retaining an eighteen-month option to prepay outstanding Opioid Deferred Payments (other than the initial Effective Date payment) at a discount (and to prepay the Opioid Deferred Payments at their undiscounted value even after the expiration of such eighteen-month period). The Opioid Deferred Payments are unsecured and are guaranteed by Mallinckrodt and its subsidiaries that are borrowers, issuers or guarantors under the Takeback Term Loans and the New 1L Notes, Existing 1L Notes, New 2L Notes and Takeback 2L Notes (such notes collectively, the "Effective Date Notes") (except for the Effective Date Notes), and certain future indebtedness (subject to certain exceptions). The Opioid Deferred Cash Payments agreement contains affirmative and negative covenants (including an obligation to offer to pay the Opioid Deferred Payments without discount upon the occurrence of certain change of control triggering events) and events of default (subject in certain cases to customary grace and cure periods). The occurrence of an event of default under the Opioid Deferred Cash Payments agreement could result in the required repayment of all outstanding Opioid Deferred Payments and could cause a cross-default that could result in the acceleration of certain indebtedness of Mallinckrodt and its subsidiaries.
•Opioid claimants also received, in addition to other potential consideration, 3,290,675 warrants for approximately 19.99% of the reorganized Company's new outstanding shares, with a nominal value $0.01 per share ("Ordinary Share(s)"), after giving effect to the exercise of the warrants, but subject to dilution from equity reserved under the management incentive plan, exercisable at any time on or prior to the sixth anniversary of the Effective Date, at a strike price of $103.40 per Ordinary Share (the "Opioid Warrant(s)").
•Pursuant to the Plan, certain subsidiaries of the Company will remain subject to an agreed-upon operating injunction with respect to the operation of their opioid business.
Governmental Acthar® Gel (repository corticotropin injection) ("Acthar Gel") Settlement
Pursuant to the Plan and the Scheme of Arrangement, on the Effective Date, all claims of the U.S. Department of Justice ("DOJ") and other governmental parties relating to Acthar Gel against the Company were deemed to have been settled, discharged, waived, released and extinguished in full against the Company, and the Company ceased to have any liability or obligation with respect to such claims, which were treated in accordance with the Plan and the terms of the settlement that is summarized below:
•The Company entered into an agreement with the DOJ and other governmental parties to settle a range of litigation matters and disputes relating to Acthar Gel (the "Acthar Gel-Related Settlement") including a Medicaid lawsuit with the Centers for Medicare and Medicaid Services ("CMS"), a related False Claims Act ("FCA") lawsuit in Boston, and an Eastern District of Pennsylvania ("EDPA") FCA lawsuit principally relating to interactions of Acthar Gel's previous owner (Questcor Pharmaceuticals Inc. ("Questcor")) with an independent charitable foundation. To implement the Acthar Gel-Related Settlement, the Company entered into two settlement agreements with the U.S. and certain relators. Under the Acthar Gel-Related Settlement, which was conditioned upon the Company commencing its Chapter 11 proceeding and provided for the distributions the applicable claimants received under the Plan, the Company will pay $260.0 million to the DOJ and other parties over seven years and reset Acthar Gel's Medicaid rebate calculation as of July 1, 2020, such that state Medicaid programs will receive 100% rebates on Acthar Gel Medicaid sales, based on current Acthar Gel pricing. The $260.0 million in payments consists of (i) a $15.0 million payment that was made upon the Effective Date; (ii) a $15.0 million payment upon the first anniversary of the Effective Date; (iii) a $20.0 million payment upon each of the second and third anniversaries of the Effective Date; (iv) a $32.5 million payment upon each of the fourth and fifth anniversaries of the Effective Date; and (v) a $62.5 million payment upon the sixth and seventh anniversaries of Effective Date. Also in connection with the Acthar Gel-Related Settlement, the Company entered into (a) separate settlement agreements with certain states, the Commonwealth of Puerto Rico, the District of Columbia and the above-noted relators, which further implement the Acthar Gel-Related Settlement, and (b) a five-year corporate integrity agreement ("CIA") with the Office of Inspector General ("OIG") of the
U.S. Department of Health and Human Services ("HHS") in March 2022. As a result of these agreements, upon effectiveness of the Acthar Gel-Related Settlement in connection with the effectiveness of the Plan, the U.S. Government has dropped its demand for approximately $640 million in retrospective Medicaid rebates for Acthar Gel and agreed to dismiss the FCA lawsuit in Boston and the EDPA FCA lawsuit. Similarly, state and territory Attorneys General have also dropped related lawsuits. In turn, the Company dismissed its appeal of the U.S. District Court for the District of Columbia's ("D.C. District Court") adverse decision in the Medicaid lawsuit, which was filed in the U.S. Court of Appeals for the District of Columbia Circuit ("D.C. Circuit").
•Mallinckrodt has entered into the Acthar Gel-Related Settlement with the DOJ and other governmental parties solely to move past these litigation matters and disputes and does not make any admission of liability or wrongdoing.
•In accordance with the effectuated Acthar Gel-Related Settlement, on June 28, 2022, the Bankruptcy Court entered an order dismissing the federal government's FCA lawsuit with prejudice, and further ordered the related state lawsuits dismissed without prejudice.
•In accordance with the effectuated Acthar Gel-Related Settlement, on July 20, 2022, the court entered an order dismissing the EDPA FCA lawsuit with prejudice.
Satisfaction of Existing Term Loans and Repayment of Existing Revolver
On the Effective Date and pursuant to the Plan, Mallinckrodt International Finance S.A. ("MIFSA") and Mallinckrodt CB LLC ("MCB" and together with MIFSA, the "Issuers"), each of which is a subsidiary of the Company, entered into a senior secured term loan facility with an aggregate principal amount of $1,392.9 million (the "2017 Replacement Term Loans") and a senior secured term loan facility with an aggregate principal amount of $369.7 million (the "2018 Replacement Term Loans", and together with the 2017 Replacement Term Loan, the "Takeback Term Loans"). Pursuant to the Plan and Scheme of Arrangement, on the Effective Date, lenders holding allowed claims in respect of the existing senior secured term loans due September 2024 (the "2024 Term Loans") and senior secured term loans due February 2025 (the "2025 Term Loans" and, together with the 2024 Term Loans, the "Existing Term Loans") incurred by the Issuers received their pro rata share of the 2017 Replacement Term Loans (in the case of the 2024 Term Loans) or the 2018 Replacement Term Loans (in the case of the 2025 Term Loans) and payment in cash of an exit fee equal to 1.00% of the remaining principal amount of Existing Term Loans held by such lenders in satisfaction thereof.
Pursuant to the Plan and Scheme of Arrangement, on the Effective Date, lenders' allowed claims in respect of the existing $900.0 million senior secured revolving credit facility (the "Existing Revolver") incurred by the Issuers and certain of their respective subsidiaries were paid in full in cash.
Reinstatement of Existing 10.00% First Lien Senior Secured Notes due 2025
On the Effective Date and pursuant to the Plan and the Scheme of Arrangement, the Issuers' existing 10.00% First Lien Senior Secured Notes due 2025 (the "Existing 1L Notes") in an aggregate principal amount of $495.0 million and the note documents relating thereto were reinstated. In addition, pursuant to the terms of the indenture governing the Existing 1L Notes, the Issuers, Mallinckrodt plc and the subsidiary guarantors of the Existing 1L Notes entered into a supplemental indenture, dated of the Effective Date (the "Supplemental Indenture"), pursuant to which certain additional assets were added to the collateral securing the Existing 1L Notes and the guarantees thereof.
Satisfaction of 10.00% Second Lien Senior Secured Notes due 2025
Pursuant to the Plan and Scheme of Arrangement, on the Effective Date, lenders holding allowed claims in respect of the Issuers' existing 10.00% second lien senior secured notes due 2025 (the "Existing 2L Notes") in an aggregate principal amount of $322.9 million received their pro rata share of a like aggregate principal amount of new 10.00% second lien senior secured notes due 2025 ("New 2L Notes") in satisfaction thereof.
Discharge of Mallinckrodt's Guaranteed Unsecured Notes
Pursuant to the Plan and Scheme of Arrangement, on the Effective Date, holders of allowed claims in respect of the Issuers' 5.75% Senior Notes due 2022, the 5.625% Senior Notes due 2023 and the 5.50% Senior Notes due 2025 (the "Guaranteed Unsecured Notes") received their pro rata share of $375.0 million aggregate principal amount of new 10.00% second lien senior secured notes due 2029 ("Takeback 2L Notes") and 100% of the new 13,170,932 Ordinary Shares issued, subject to dilution by the Opioid Warrants described above and the management incentive plan ("MIP"). Otherwise, pursuant to the Plan and the Scheme of Arrangement, all claims in respect of the Guaranteed Unsecured Notes and the indentures governing them were settled, discharged, waived, released and extinguished in full.
Resolution of Other Remaining Claims
Pursuant to the Plan and Scheme of Arrangement, on the Effective Date, certain trade claims and other general unsecured claims, including the claims of holders of the 4.75% senior notes due April 2023, against the Debtors were deemed to have been settled, discharged, waived, released and extinguished in full. Mallinckrodt ceased to have any liability or obligation with respect to such claims, which were then treated in accordance with the Plan and Scheme of Arrangement, which provided for the holders of such
claims to share in $135.0 million in cash, plus other potential consideration, including but not limited to 35.0% of the proceeds of the sale of the StrataGraft® Priority Review Voucher ("PRV") and $20.0 million payable upon the achievement of both (1) U.S. Food and Drug Administration ("FDA") approval of Terlivaz® (which occurred on September 14, 2022) and (2) cumulative net sales of $100.0 million of Terlivaz.
On June 30, 2022, subsequent to the Effective Date, the Company completed the sale of its PRV for $100.0 million and received net proceeds of $65.0 million as the buyer remitted the remaining $35.0 million to the General Unsecured Claims Trustee pursuant to the terms of (i) the Plan, and (ii) that certain General Unsecured Claims Trust Agreement entered into in connection with the Plan.
New Warrant Agreement
On the Effective Date and pursuant to the Plan, Mallinckrodt entered into a warrant agreement and issued 3,290,675 Opioid Warrants to purchase the Ordinary Shares to MNK Opioid Abatement Fund, LLC (the "Initial Holder"), a wholly owned subsidiary of the Opioid Master Disbursement Trust II, a master disbursement trust established in accordance with the Plan. Each Opioid Warrant is initially exercisable for one Ordinary Share at an initial exercise price of $103.40 per Ordinary Share (the "Exercise Price"), subject to the cashless exercise provisions contained in the warrant agreement. The Opioid Warrants are exercisable from the date of issuance until the sixth anniversary of the Effective Date. The warrant agreement governing the Opioid Warrants contains customary anti-dilution adjustments in the event of any share dividends, share splits, distributions, issuance of additional shares or options, or certain other dilutive events.
Other than in the case of an adjustment through certain other dividends or distributions, whenever the Exercise Price is adjusted as provided above, the number of Opioid Warrant shares for which an Opioid Warrant is exercisable (the "Warrant Number") shall simultaneously be adjusted by multiplying the warrant number for which an Opioid Warrant is exercisable immediately prior to such adjustment by a fraction, the numerator of which shall be the Exercise Price immediately prior to such adjustment, and the denominator of which shall be the Exercise Price immediately thereafter.
Pursuant to the warrant agreement, no holder of an Opioid Warrant, by virtue of holding or having a beneficial interest in the Opioid Warrant, will have the right to vote, receive dividends, receive notice as stockholders with respect to any meetings of stockholders for the election of Mallinckrodt's directors or any other matter, or exercise any rights whatsoever as a stockholder of Mallinckrodt unless, until and only to the extent such holders become holders of record of Ordinary Shares issued upon exercise of Opioid Warrants.
New Registration Rights Agreement
On the Effective Date and pursuant to the Plan, Mallinckrodt entered into a registration rights agreement (the "Registration Rights Agreement") with the Initial Holder of the Opioid Warrants. The Registration Rights Agreement provides certain resale and other registration rights for the registrable securities, including the Opioid Warrants and the Opioid Warrant shares, held by the Initial Holder and its permitted transferees and assignees. Pursuant to the Registration Rights Agreement, Mallinckrodt has agreed to prepare and file with the SEC a registration statement by no later than (x) 90 days after the Effective Date if Mallinckrodt is then eligible to register the registrable securities on a registration statement on Form S-3 or (y) 180 days after the Effective Date if Mallinckrodt is not then eligible to register the registrable securities on a registration statement on Form S-3, in each case, covering the resale pursuant to the Securities Act of 1933, as amended (the "Securities Act") of all registrable securities held by the initial holder and its permitted transferees and assignees. Following the effectiveness of such registration statement, Mallinckrodt has agreed to use commercially reasonable efforts to keep such registration statement continuously effective under the Securities Act until the date that all registrable securities covered by such registration statement are no longer registrable securities. In addition, during the effectiveness of such registration statement, the holders of a majority of registrable securities then outstanding may request to sell all or any portion of their registrable securities in an underwritten public offering that is registered pursuant to such registration statement, subject to the limitations provided in the Registration Rights Agreement.

Exit Financing
On the Effective Date, the Company issued $650.0 million aggregate principal amount of new 11.50% First Lien Senior Secured Notes due 2028 (the "New 1L Notes") and entered into a receivables financing facility based on a borrowing base with a maximum draw of up to $200.0 million. See Note 11 for further information on these debt instruments.
Financing
Predecessor Chapter 11 Financing
The Company obtained an order of the Bankruptcy Court in the Chapter 11 Cases (in a form agreed with, among others, the agent under the predecessor senior secured credit facilities, lenders under the Existing Revolver and the Existing Term Loans and holders of the Existing 1L Notes and the Existing 2L Notes) permitting the use of cash collateral to finance the Chapter 11 Cases.
Such order required that the Company make cash adequate protection payments on the Existing Revolver and Existing Term Loans for, among other things, unpaid pre-petition and post-petition fees, unpaid pre-petition interest (at the specified contract rate) and post-petition interest (at a rate equal to (1) the adjusted London Interbank Offered Rate ("LIBOR"), plus (2) the contract-specified applicable margin, and plus (3) an incremental 200 basis points), quarterly amortization payments on the Existing Term Loans and reimbursement of certain costs. Such order further required that the Company make cash adequate protection payments on the Existing 1L Notes and Existing 2L Notes for, among other things, unpaid pre-petition and post-petition interest (at the specified non-default interest rate) and reimbursement of certain costs. On April 13, 2021, the Debtors received Bankruptcy Court approval of their motion to amend the final cash collateral order as of March 22, 2021 to pay post-petition interest on the senior secured term loans at a rate equal to (1) the adjusted LIBOR, plus (2) the contract-specified applicable margin, and plus (3) an incremental 250 basis points for its Existing Term Loans. The cash collateral order expired on June 16, 2022.
Interest expense incurred and paid with respect to the incremental adequate protection payments of 200 basis points and 250 basis points on the Existing Revolver and Existing Term Loans, respectively, were as follows:
Predecessor
Three Months Ended
September 24, 2021
Interest expense incurred for adequate protection payments$15.8 
Cash paid for adequate protection payments16.4 
Predecessor
Period from
January 1, 2022
through
June 16, 2022		Nine Months Ended
September 24, 2021
Interest expense incurred for adequate protection payments$28.8 $46.1 
Cash paid for adequate protection payments28.8 45.5 

Contractual interest
While the Chapter 11 Cases were pending, the Company was not accruing interest on its unsecured debt instruments as of the Petition Date on a go-forward basis as the Debtors did not anticipate making interest payments due under their respective unsecured debt instruments; however, the Debtors expect to pay all interest payments in full as they come due under their respective senior secured debt instruments. The total aggregate amount of interest payments contractually due under the Company's unsecured debt instruments, which the Company did not pay as the obligation was extinguished pursuant to the Plan, was $46.5 million for the period January 1, 2022 through June 16, 2022 (Predecessor) and $17.7 million and $64.2 million for the three and nine months ended September 24, 2021 (Predecessor), respectively
3.Fresh-Start Accounting
The Company qualified for and adopted fresh-start accounting as of the Effective Date in accordance with ASC 852 as (i) the reorganization value of the assets of the Company immediately prior to the date of effectuation of the Plan was less than the post-petition liabilities and allowed claims and (ii) the holders of the voting shares of the Predecessor immediately before effectuation of the Plan received less than 50% of the voting shares of the Successor.

Reorganization Value
Reorganization value represents the fair value of the Successor Company's total assets and is intended to approximate the amount a willing buyer would pay for the assets immediately after restructuring. Upon the application of fresh-start accounting, the Company allocated the reorganization value to its individual assets based on their estimated fair values in accordance with Accounting Standards
Codification ("ASC") Topic 805 - Business Combinations. Deferred income tax amounts were determined in accordance with ASC Topic 740 - Income Taxes.
As set forth in the disclosure statement approved by the Bankruptcy Court, the estimated enterprise value of the Successor was estimated to be between $5,200.0 million and $5,700.0 million, with a midpoint of $5,450.0 million, which was estimated with the assistance of third-party valuation advisors using various valuation methods, including (i) discounted cash flow analysis, a calculation of the present value of the future cash flows to be generated by the business based on its projection, and (ii) comparable public company analysis, a method to estimate the value of a company relative to other publicly traded companies with similar operation and financial characteristics. The estimated enterprise value per the disclosure statement included estimated equity value in a range between $563.0 million and $1,063.0 million, with a midpoint of $813.0 million. Subsequent to the filing of the disclosure statement, the Company made revisions to certain of the cash flow projections due to declines in projected operating performance. Based upon a reevaluation of relevant factors used in determining the range of enterprise value and updated expected cash flow projections, the Company concluded the enterprise value, or fair value, was $5,223.0 million.
The basis of the discounted cash flow analysis used in developing the enterprise value was based on Company prepared projections that included a variety of estimates and assumptions. While the Company considers such estimates and assumptions reasonable, they are inherently subject to significant business, economic and competitive uncertainties, many of which are beyond the Company's control and, therefore, may not be realized. Changes in these estimates and assumptions may have had a significant effect on the determination of the Company's enterprise value.
The following table reconciles the enterprise value to the implied fair value of the Successor's equity as of the Effective Date:
Enterprise value$5,223.0 
Plus: Enterprise value adjustments (1)
197.0 
Adjusted enterprise value5,420.0 
Plus: Cash and cash equivalents
297.9 
Plus: Non-operating assets, net (2)
178.7 
Less: Fair value of debt
(3,067.2)
Less: Fair value of Opioid-Related Litigation Settlement, Acthar Gel-Related Settlement, StrataGraft PRV proceeds and Terlivaz contingent value rights
(625.8)
Successor equity value$2,203.6 
(1)Represents incremental tax benefits not contemplated in the projections utilized in the disclosure statement.
(2)Represents non-operating assets and liabilities which were excluded from the enterprise value as put forth in the disclosure statement as there were no cash projections associated with these net assets.
Upon the application of fresh-start accounting, the Company allocated the reorganization value to its individual assets based on their estimated fair values. Reorganization value represents the fair value of the Successor's assets before considering liabilities.
The following table reconciles the Company's enterprise value to its reorganization value as of the Effective Date:
Adjusted enterprise value$5,420.0 
Plus: Cash and cash equivalents
297.9 
Plus: Non-operating assets, net
178.7 
Plus: Current liabilities (excluding debt or debt-like items)
522.5 
Plus: Other non-current liabilities (excluding debt or debt-like items)
183.2 
Reorganization value of Successor assets$6,602.3 

Unaudited Condensed Consolidated Balance Sheet
The four-column unaudited condensed consolidated balance sheet as of the Effective Date included herein, applies effects of the Plan (reflected in the column "Reorganization Adjustments") and fresh-start accounting (reflected in the column "Fresh-Start Adjustments") to the carrying values and classifications of assets or liabilities. Upon adoption of fresh-start accounting, the recorded amounts of assets and liabilities were adjusted to reflect their estimated fair values. Accordingly, the reported historical financial statements of the Predecessor prior to the adoption of fresh-start accounting for periods ended on or prior to the Effective Date are not comparable to those of the Successor. The explanatory notes highlight methods used to determine fair values or other amounts of the assets and liabilities as well as significant assumptions.
The four-column unaudited condensed consolidated balance sheet as of June 16, 2022 is as follows:
PredecessorReorganization AdjustmentsFresh-Start AdjustmentsSuccessor
Assets
Current Assets:
Cash and cash equivalents$1,392.6 $(1,094.7)(a)$— $297.9 
Accounts receivable, less allowance for doubtful accounts387.4 — — 387.4 
Inventories375.2 — 851.8 (q)1,227.0 
Prepaid expenses and other current assets322.6 75.3 (b)(58.3)(r)339.6 
Current asset held for sale— — 100.0 (j)100.0 
Total current assets2,477.8 (1,019.4)893.5 2,351.9 
Property, plant and equipment, net748.6 — (299.2)(s)449.4 
Intangible assets, net5,166.6 — (2,014.4)(t)3,152.2 
Deferred income taxes— — 453.4 (l)453.4 
Other assets222.8 (3.9)(c)(23.5)(u)195.4 
Total Assets$8,615.8 $(1,023.3)$(990.2)$6,602.3 
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt$1,389.9 $(1,355.2)(d)$— $34.7 
Accounts payable156.4 (53.8)(e)— 102.6 
Accrued payroll and payroll-related costs71.4 — — 71.4 
Accrued interest20.8 (13.0)(f)— 7.8 
Acthar Gel-Related Settlement— 16.5 (g)— 16.5 
Opioid-Related Litigation Settlement— 200.0 (h)— 200.0 
Accrued and other current liabilities296.1 50.8 (i)(6.1)(v)340.8 
Current liability held for sale— 35.0 (j)— 35.0 
Total current liabilities1,934.6 (1,119.7)(6.1)808.8 
Long-term debt— 3,050.9 (d)(18.4)(w)3,032.5 
Acthar Gel-Related Settlement— 63.2 (g)— 63.2 
Opioid-Related Litigation Settlement liability— 304.3 (h)— 304.3 
Pension and postretirement benefits27.6 27.2 (k)— 54.8 
Environmental liabilities37.1 — — 37.1 
Deferred income taxes20.4 102.7 (l)(121.7)(l)1.4 
Other income tax liabilities75.9 — (61.9)(x)14.0 
Other liabilities68.6 23.6 (m)(9.6)(v)82.6 
Liabilities subject to compromise6,402.7 (6,402.7)(n)— — 
Total Liabilities8,566.9 (3,950.5)(217.7)4,398.7 
Shareholders' Equity:
Predecessor preferred shares— — — — 
Predecessor ordinary A shares— — — — 
Predecessor ordinary shares18.9 (18.9)(o)— — 
Successor ordinary shares— 0.1 (o)— 0.1 
Predecessor ordinary shares held in treasury(1,616.1)1,616.1 (o)— — 
Predecessor additional paid-in capital5,599.5 (5,599.5)(o)— — 
Successor additional paid-in capital— 2,203.5 (o)— 2,203.5 
Predecessor accumulated other comprehensive loss(9.9)— 9.9 (y)— 
Retained (deficit) earnings(3,943.5)4,725.9 (p)(782.4)(z)— 
Total Shareholders' Equity48.9 2,927.2 (772.5)2,203.6 
Total Liabilities and Shareholders' Equity$8,615.8 $(1,023.3)$(990.2)$6,602.3 
Reorganization Adjustments
(a)The table below reflects the sources and uses of cash on the Effective Date:
Sources:
Proceeds from New 1L Notes$637.0 
Total Sources637.0 
Uses:
Payment of Predecessor revolving credit facility(900.0)
Upfront payment of the Opioid-Related Litigation Settlement(447.4)
Upfront payment of the Acthar Gel-Related Settlement, inclusive of settlement interest(17.8)
Payment of secured, administrative, priority and trade claims(26.2)
Payment of professional fees(43.5)
Payment to fund professional fees escrow (prepaid and other current assets restricted cash)(89.0)
Payment of general unsecured claims(135.0)
Payment of noteholder consent fees(19.3)
Payment of costs, fees and expenses related to exit-financing activities, an exit fee associated with senior secured loans and accrued and unpaid interest on certain pre-emergence debt(53.5)
Total Uses(1,731.7)
Net Uses of Cash$(1,094.7)
(b)Represents the transfer of funds to a restricted cash account for purposes of funding the $89.0 million professional fee reserve offset by the release of a $10.9 million prepaid success fee as a result of emergence and the write off of prepaid expenses related to premiums for the Predecessor Company's directors' and officers' insurance policies.
(c)Debt issuance costs of $2.6 million related to entering into a receivables financing facility. These costs were capitalized as other non-current assets as the facility was undrawn as of June 16, 2022. Refer to Note 11 for further information on the receivables financing facility. Also reflects a write-off of $6.5 million of prepaid expenses related to premiums for the Predecessor Company's directors' and officers' insurance policies.
(d)Impacts to long-term debt, net of current maturities, pursuant to the Plan, included the following:
•Repayment of the $900.0 million Existing Revolver;
•Issuance of the 2017 and 2018 Replacement Term Loans of $1,392.9 million and $369.7 million, respectively, of which $34.7 million was current;
•Issuance of the New 2L Notes of $322.9 million;
•Issuance of the Takeback 2L Notes of $375.0 million;
•Reinstatement of the Existing 1L Notes of $495.0 million principal, net of $5.1 million deferred financing fees; and
•Issuance of $650.0 million New IL Notes, net of a $13.0 million original issuance discount and $9.7 million of deferred debt issuance costs.
Fair value adjustments to the carrying value of debt instruments impacted by the Plan as determined by the Black-Derman-Toy model as follows:
2017 Replacement Term Loan$(169.4)
2018 Replacement Term Loan(42.2)
New 2L Notes(95.7)
Takeback 2L Notes(184.8)
Total fair value adjustment to debt instruments$(492.1)
Predecessor debt for certain of these instruments described above were classified in liabilities subject to compromise ("LSTC") as of the Effective Date.
(e)Represents $43.5 million of professional fees paid to the Company's restructuring advisors upon the Company's emergence from Chapter 11 bankruptcy and $25.2 million of secured, administrative and priority payments, partially offset by $14.6 million of professional advisor success fees incurred on the Effective Date plus reinstatement of LSTC.
(f)Represents payments of accrued interest on the Company's Existing Revolver, Existing Term Loans and Existing 2L Notes in accordance with the cash collateral order on the Effective Date.
(g)Pursuant to the Plan, the Company agreed to pay $260.0 million to the DOJ and other parties over seven years to settle the Acthar Gel-related matters. The Company reduced its estimated allowed claim amount related to these matters to the settlement amount of $260.0 million and reclassified it from LSTC to other non-current liabilities. On the Effective Date, the Company made an upfront payment of $17.8 million, inclusive of settlement interest. The remaining deferred cash payments of $245.0 million and related settlement interest were recorded at fair value utilizing a discounted cash flow model with an average credit-adjusted discount rate of 27.8%. The fair value of the liability was $16.5 million and $63.2 million, respectively, reflected within current and other non-current liabilities in the above table.
(h)Pursuant to the Plan, the Company agreed to pay $1,725.0 million into certain trusts to resolve all opioid claims, and made an upfront payment of $447.4 million on the Effective Date. The remaining deferred cash payments of $1,275.0 million were recorded at fair value utilizing the Black-Derman-Toy model, which incorporates the option to prepay as well as other inputs such as an average credit-adjusted discount rate of 27.8%. The fair value of the liability was $200.0 million and $304.3 million, respectively, reflected within current and other non-current liabilities in the above table.
(i)The following table reconciles reorganization adjustments to accrued and other current liabilities:
Severance - Exiting Chief Executive Officer ("CEO")$5.7 
Reinstatement of various successor obligations from LSTC15.4 
Success fees for professionals incurred on Effective Date29.7 
$50.8 
(j)As part of fresh-start accounting, the Company recorded a $100.0 million intangible asset in relation to the Company's PRV that was awarded under a FDA program intended to encourage the development of certain product applications for therapies used to treat or prevent material threat medical countermeasures. It also recorded a $35.0 million liability related to the proceeds from a sale of the PRV which was due to the general unsecured claims trustee pursuant to the term of the Plan and the general unsecured claims trust agreement entered into with the Plan. As of the Effective Date, this asset and liability were classified as held-for-sale. Refer to Note 10 for further information on the subsequent sale of the PRV.
(k)Reinstatement of certain long-term pension and other postretirement plans from LSTC to other liabilities.
(l)Reflects reorganization adjustments consisting of (1) the reduction in federal and state net operating loss ("NOL") carryforwards from the cancelation of debt income ("CODI") realized upon emergence and limitations under Section 382 and 383 of the U.S. Internal Revenue Code of 1986 (the "IRC"); (2) the net decrease in deferred tax assets resulting from reorganization adjustments; (3) the reduction in the valuation allowance on the Company's deferred tax assets and fresh-start adjustments consisting of (4) the net decrease in deferred tax liabilities resulting from fresh-start adjustments; and (5) the release of uncertain tax positions that are no longer required upon emergence.
(m)Reinstatement of the Company's $16.8 million asbestos-related defense costs from LSTC to other liabilities and establishment of a liability for the contingent value right ("CVR") associated with Terlivaz in accordance with the Plan and Scheme of Arrangement. The CVR is based upon the achievement of a cumulative net sales milestone. The Company will assess the likelihood of and timing of making such payment at each balance sheet date. The fair value of the contingent payment was measured based on the net present value of a probability-weighted assessment estimated using a Monte Carlo simulation. The Company determined the fair value of the CVR to be $6.8 million as of the Effective Date.
(n)LSTC were settled as follows in accordance with the Plan (in millions):
Liabilities subject to compromise
Accounts payable$17.7 
Accrued interest35.2 
Debt3,746.2 
Environmental liabilities67.2 
Acthar Gel-Related Settlement630.0 
Opioid-Related Litigation Settlement liability1,722.4 
Other current and non-current liabilities151.6 
Pension and postretirement benefits32.4 
Total liabilities subject to compromise$6,402.7 
To be reinstated on the Effective Date:
Accounts payable$(0.1)
Other current and non-current liabilities(27.3)
Pension and postretirement benefits(32.4)
Total liabilities reinstated$(59.8)
Consideration provided to settle amounts per the Plan
Issuance of Successor common stock$(2,189.7)
Issuance of Opioid Warrants(13.9)
Issuance of Takeback Term Loans and New 2L Notes(1,778.3)
Acthar Gel-Related Settlement(79.7)
Opioid-Related Litigation Settlement liability(504.3)
Issuance of Takeback 2L Notes to holders of the Guaranteed Unsecured Notes(190.2)
Contingent liabilities for proceeds of sale of StrataGraft PRV and Terlivaz CVR(41.8)
Cash payment(601.3)
Total consideration provided to settle amounts per the Plan$(5,399.2)
Gain on settlement of liabilities subject to compromise$943.7 
(o)Pursuant to the Plan, as of the Effective Date, all Predecessor's preferred and ordinary shares were cancelled without any distribution. The following table reconciles reorganization adjustments made to Successor common stock, Opioid Warrants and additional paid in capital:
Par value of 13,170,932 shares of Successor Common Stock issued to former holders of the Guaranteed Unsecured Notes
(par valued at 0.01 dollars per share)
$0.1 
Fair value of Opioid Warrants issued to holders of the Guaranteed Unsecured Notes (1)
13.9 
Additional paid in capital - Successor Common Stock2,189.6 
Successor equity$2,203.6 
(1)The fair value of the Opioid Warrants was estimated using a Black-Scholes model with the following assumptions: $18.50 stock price of the Successor Company; exercise price per share of $103.40; expected volatility of 62.28%; risk free interest rate of 3.34%, continuously compounded; and a holding period of six years. The expected volatility assumption is based on the historical and implied volatility of the Company's peer group with similar business models.
(p)Retained deficit - The cumulative effect of the consummation of the Plan on the Predecessor's retained deficit is as follows:
Gain on settlement of LSTC$943.7 
Professional, success and exit fees(91.6)
Release of prepaid success fee(10.9)
Release of prepaid insurance (1)
(9.2)
Accrual of severance for former CEO(5.7)
Income tax expense on plan adjustments(102.7)
Cancellation of Predecessor equity4,002.3 
Net impact on retained deficit$4,725.9 
(1)Write off of prepaid expenses related to premiums for the Predecessor Company's directors' and officers' insurance policies.
Fresh-Start Adjustments
(q)Reflects the fair value adjustment related to the Company's inventory. Both the bottom-up and top-down approach were used. The bottom-up approach considers the inventory value that had been created by the Company including the costs incurred, profit realized, and tangible and intangible assets used pre-Effective Date. The top-down approach measures the incremental inventory value created by the market participant buyer as part of its selling effort to an end customer and considers the costs that will be incurred, the profit that will be realized, and the tangible and intangible assets that will be used post-Effective Date.
(r)Reflects the reduction of $54.0 million in prepaid income taxes due to remeasurement as a result of fresh-start accounting. Also reflects a write-off of $4.3 million of asbestos indemnification receivable affiliated with asbestos-related defense costs in line with the Company's accounting policy change as outlined in Note 1.
(s)Reflects the fair value adjustment related to the Company's property, plant and equipment. Both the market and cost approaches were utilized to fair value land and buildings. The cost approach was utilized to fair value capitalized software and machinery and equipment. Construction in process was reported at its cost less adjustments for economic obsolescence.
(t)Reflects the fair value adjustment related to the Company's intangible assets. The fair value of the completed technology and in-process research and development ("IPR&D") intangible assets were determined using the income approach. The cash flows were discounted commensurate with the level of risk associated with each asset or its projected cash flows. The valuation used discount rates ranging from 13.0% through 15.0%, depending on the asset. The IPR&D discount rate was developed after assigning a probability of success to achieving the projected cash flows based on the current stages of development, inherent uncertainty in the FDA approval process and risks associated with commercialization of a new product. See Note 10 for further information on intangible assets.
(u)Reflects the write-off of (i) $16.0 million of asbestos indemnification receivable affiliated with asbestos-related defense costs in line with the Company's accounting policy change as outlined in Note 1; (ii) $3.9 million of spare parts that did not meet the Company's capitalization threshold; and (iii) $1.1 million of third party debt issuance costs. Also reflects a decrease of $0.9 million to income tax receivables associated with a change in uncertain tax positions as a result of fresh-start accounting.
In addition, the Company's lease obligations were revalued using the incremental borrowing rate applicable to the Company upon emergence from the Chapter 11 proceedings and commensurate with its new capital structure. The incremental borrowing rate used in the revaluation of the lease obligations increased from 8.85% in the Predecessor period to 11.83% in the Successor period. The revaluation of lease obligations includes the adjustment for contract-based off-market intangibles for favorable or unfavorable terms to the right-of-use assets as well as the removal of right-of-use assets (and affiliated lease liabilities) associated with the Company's leases with a remaining contract term of less than one year as of the Effective Date. The revaluation resulted in a reduction in the right-of-use asset of $1.6 million.
(v)Reflects the write-off of (i) $6.1 million and $16.7 million of current and non-current asbestos-related defense costs, respectively, in line with the Company's accounting policy change as outlined in Note 1; and (ii) an adjustment of $6.9 million to increase the Company's total lease liabilities as a result of the revaluation of the lease obligations as described in footnote (t) above.
(w)Reflects the write-off of $5.1 million of unamortized debt issuance costs and a $23.5 million fair value adjustment to debt principal as determined by the Black-Derman-Toy model related to the reinstated Existing 1L Notes.
(x)Reflects the reduction of liabilities for unrecognized tax benefits that are no longer required upon emergence.
(y)Reflects the fair value adjustment to eliminate the accumulated other comprehensive income of $8.1 million related to pension benefits and $2.1 million of currency translation adjustment, partially offset by the elimination of $0.3 million of income tax effects, which resulted in income tax benefit of $0.3 million.
(z)The cumulative effect of the fresh-start accounting on the Successor's retained deficit is as follows:
Fresh-start adjustment:
Inventories$851.8 
Property, plant and equipment, net(299.2)
Intangible assets, net(2,014.4)
Current asset held for sale100.0 
Debt18.4 
Other assets and liabilities(11.2)
Total fresh-start adjustments impacting reorganization items, net(1,354.6)
Fresh-start adjustments to accumulated other comprehensive income, net of $0.3 million of tax benefit
(9.9)
Total fresh-start adjustments recorded to income tax benefit582.1 
Net fresh-start impact to accumulated deficit$(782.4)

Reorganization items, net
Reorganization items, net for the Predecessor represent amounts incurred after the Petition Date but prior to emergence as a direct result of the Chapter 11 Cases and were comprised of gains and losses associated with the reorganization, primarily the loss on fresh-start adjustments, gain on settlement of LSTC, bankruptcy-related professional fees, debt financing fees and write-off of debt issuance costs and related unamortized premiums and discounts. Successor reorganization items, net represent amounts incurred after the Effective Date that directly resulted from Chapter 11 and were entirely comprised of professional fees associated with the implementation of the Plan. Cash paid for reorganization items, net for the period from June 17, 2022 through September 30, 2022 (Successor), January 1, 2022 through June 16, 2022 (Predecessor) and the nine months ended September 24, 2021 (Predecessor) was $9.9 million, $304.1 million and $209.1 million, respectively. Reorganization items, net, were comprised of the following:
SuccessorPredecessor
Three Months Ended September 30, 2022Three Months Ended September 24, 2021
Professional and other service provider fees$14.2 $119.4 
Debt valuation adjustments— 6.8 
Total reorganization items, net$14.2 $126.2 
SuccessorPredecessor
Period from
June 17, 2022
 through
September 30, 2022		Period from
January 1, 2022
 through
June 16, 2022		Nine Months Ended September 24, 2021
Gain on settlements of LSTC$— $(943.7)$— 
Loss on fresh-start adjustments— 1,354.6 — 
Professional and other service provider fees17.7 161.1 306.6 
Success fees for professional service providers— 44.3 — 
Write off of prepaid premium for directors' and officers' insurance policies— 9.2 — 
Debt valuation adjustments— — 23.1 
Adjustments of other claims— 5.4 (0.5)
Total reorganization items, net$17.7 $630.9 $329.2