A consortium of Endo International lenders, featuring heavyweights such as Oaktree Capital Management, Silver Point Capital, and Bain Capital, has created a groundbreaking proposal to settle U.S. government claims, catalyzing the pharmaceutical company’s stalled bankruptcy restructuring. The offer, detailed in recent court filings, outlines a payment of up to $465 million to resolve lingering issues obstructing the bankruptcy process.
Background of the Proposal
Despite the lender group’s earlier agreement to acquire Endo in exchange for erasing a substantial $6 billion in company debt, objections from the U.S. Department of Justice have impeded the sale. The Justice Department’s concerns have created a roadblock, prompting the lenders to intervene and offer a resolution.
Negotiations and Stakeholder Involvement
As revealed in a court filing on Monday in the federal bankruptcy court in New York, the lender group is currently in discussions with the Justice Department. The proposal’s success hinges on securing financial contributions from other stakeholders within Endo, a crucial element yet to be finalized.
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Previous Commitments and Opioid Crisis Resolutions
Previously, the lender group had agreed to finance settlements amounting to nearly $600 million, addressing claims related to Endo’s alleged contribution to the U.S. opioid crisis. These settlements aimed to resolve accusations that the company played a role in fueling the epidemic through its painkillers.
Components of the Justice Department Settlement
The proposed settlement with the Justice Department seeks to resolve claims totaling over $7 billion, encompassing alleged tax debts, a criminal investigation into Endo’s opioid marketing practices, and potential overpayments for the company’s medications by the federal government. The suggested settlement involves a payment plan spread over ten years, with an additional $100 million contingent payment if Endo exceeds financial expectations from 2024 to 2028.
Alternatives and Response from the Justice Department
Either party, Endo or the Justice Department, has the option to opt for a one-time $200 million payment after Endo’s bankruptcy, as outlined in the court filing. Currently, the Justice Department has not responded immediately to requests for comments on the proposed settlement.
Endo’s Bankruptcy Context
Endo filed for bankruptcy in August 2022, seeking to address its substantial $8 billion debt and settle numerous lawsuits related to its alleged role in the opioid epidemic. As part of its bankruptcy commitments, Endo has pledged substantial payments to U.S. states, individuals affected by opioid addiction, and a trust for future opioid claimants.
Ongoing Legal Challenges and the Opioid Epidemic Impact
Before filing for bankruptcy, Endo had already settled opioid lawsuits, reaching agreements with eight U.S. states. However, the company still faces over 3,100 other opioid-related lawsuits, and its expenditures on opioid defense costs amounted to approximately $344 million, according to court filings. The opioid epidemic has claimed the lives of over 600,000 people in the U.S. over the past two decades, resulting in legal actions against pharmaceutical companies, distributors, and pharmacies, leading to total settlements exceeding $50 billion nationwide.
Conclusion and Case Information
The case, officially known as In re Endo International, is under review in the U.S. Bankruptcy Court for the Southern District of New York, with case number 22-22549.
Representation:
- For Endo International: Abigail Davis, Lisa Laukitis, and Paul Leake of Skadden, Arps, Slate, Meagher & Flom LLP, among others.
- For the ad hoc group of senior lenders: Michael Cohen and Scott Greenberg of Gibson Dunn & Crutcher.
- For the DOJ: Jean-David Barnea, Tara Schwartz, and Peter Aronoff of the U.S. Department of Justice, among others.
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