WASHINGTON: OxyContin maker Purdue Pharma LP is preparing to seek bankruptcy protection before the end of the month if it does not reach a settlement with US communities over widespread opioid litigation, three people familiar with the matter said, after some states balked at the company’s $10 billion to $12 billion offer in August to end their lawsuits as part of a negotiated Chapter 11 case.
On Friday, Purdue lawyers had documents prepared for a Chapter 11 filing at a moment’s notice, Reuters has learned. A federal judge, who expects plaintiffs to update him on settlement progress this week, wants 35 state attorneys general on board with a deal, a threshold that has not yet been reached, the people familiar with the matter said.
Purdue lawyers have told lead attorneys for local governments and some state attorneys general for weeks, and again in recent days, that the company will have to file for bankruptcy without a settlement if one is not reached soon, one of the people said. This approach is known as a “free-fall” bankruptcy filing because it lacks consensus on a reorganisation beforehand.
Strong opposition from some attorneys general such as those in Massachusetts and New York emerged last week after confidential discussions on Purdue’s settlement talks became public in media reports, with Connecticut’s calling for Purdue to be “broken up and shut down,” and sold in parts. Their main sticking point is how much Purdue’s controlling Sackler family will pay, the people said.
Purdue faces more than 2,000 lawsuits from cities, counties and states alleging it helped fuel the US opioid epidemic, and media reported in March that the company and family began exploring bankruptcy options for Purdue to halt lawsuits and attempt to resolve litigation with plaintiffs rather than fight every single case.
Purdue and the Sacklers, have denied the allegations.
One reason the Stamford, Connecticut company is determined to file for bankruptcy this month is an October 21 trial Purdue wants to avoid, the people said. The trial, stemming from widespread lawsuits largely brought by local governments that are consolidated in an Ohio federal court, risks a verdict with outsize damages that Purdue, currently carrying $500 million in cash, cannot withstand, one of the people said.
The bankruptcy timing could slip if Purdue reaches a settlement or the October trial is delayed, the people said. Ohio’s attorney general last week asked a federal appeals court to halt the trial.
Sackler representatives had no immediate comment regarding Purdue’s bankruptcy planning or the details of settlement talks.
In a statement, Purdue said it “has made clear that it prefers a constructive global resolution” as opposed to “years of wasteful litigation and appeals.” Purdue is “actively working with state attorneys general and other plaintiffs on solutions that have the potential to save tens of thousands of lives and deliver billions of dollars to the communities affected by the opioid crisis,” the company said.
With a stable balance sheet and no significant debt, Purdue Pharma’s woes are legal, rather than financial. Purdue believes that it could put itself on firmer footing, and potentially restructure and resolve lawsuits in less time, if it were able to file for bankruptcy with a settlement in hand. — Reuters
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