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Mallinckrodt Woes May Risk Opioid Payout; Carvana Rallies
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Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Friday, June 9. In today's briefing, Mallinckrodt is at risk of filing for bankruptcy again, a development that could disrupt its agreed payments to opioid victims. Shares of Carvana surged nearly 50% after the online used-car retailer said it expects improving profit metrics in the second quarter.
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Mallinckrodt’s financial position has weakened since the opioid settlement was reached.
PHOTO: KRISTOFFER TRIPPLAAR/SIPA USA/ASSOCIATED PRESS
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Mallinckrodt’s financial woes put opioid settlement at risk. Generic drugmaker Mallinckrodt is at risk of filing for bankruptcy again, a development that stands to disrupt its commitment to paying opioid victims under a settlement deal. But former executives are likely to keep their liability releases.
The Dublin-based company, which reached a $1.7 billion opioid settlement last year through a bankruptcy filing, is now considering a repeat chapter 11 filing after struggling financially. If it files for bankruptcy again, its former executives’ grants of legal immunity from civil opioid lawsuits will likely be unaffected, according to legal experts.
Those releases will stand “unless somehow the court in the second case felt it had the power to vacate the confirmation order in the first case—which rarely, if ever, happens,” said Bruce Markell, a former bankruptcy judge and now a professor at Northwestern University Pritzker School of Law.
But the remaining $1.25 billion in opioid settlement payments that Mallinckrodt still owes could be reduced or delayed because those claims are unsecured, meaning there is no collateral that can be seized.
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Shares of Carvana surged nearly 50% after the online used-car retailer said it expects improving profit metrics in the second quarter as cost-cutting measures take hold.
The Tempe, Ariz., company has struggled over the past year as rising interest rates weigh on demand for big-ticket purchases and as stubbornly high inflation squeezes Americans’ pocketbooks. Falling prices for used cars have also dragged on the value of Carvana’s inventory.
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Chief Executive Ernie Garcia III said Thursday that the company’s outlook is beginning to improve as it focuses on profitability.
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GameStop’s silence is no longer golden. GameStop has some explaining to do—which hasn’t been its strong suit of late.
Three months after surprising investors with better-than-expected sales and actual profits, the videogame retailer had a different sort of jolt in store. The company announced Wednesday afternoon that it had terminated Chief Executive Matt Furlong, without giving a reason.
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Ryan Cohen, GameStop’s largest shareholder and board chair, will take direct control of the company through his new title of executive chairman.
Ten minutes later, GameStop reported disappointing results for its fiscal first quarter. Revenue of $1.2 billion was down 10% year over year—the largest such decline in more than two years.
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Rules were softened for U.S. regional banks under the Trump administration, but loopholes are now set to be closed. Also, regulators could raise capital requirements on big U.S. banks by about 20%. But if Credit Suisse was on the brink of collapse despite exceeding all regulatory targets, what is the point of them?
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The Supreme Court appeared skeptical that federal law allows the education secretary to forgive an estimated $430 billion in loans during oral arguments earlier this year.
PHOTO: VALERIE PLESCH/BLOOMBERG NEWS
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White House preps plan B for student loan forgiveness. Biden administration officials are quietly planning for the possibility that the Supreme Court could strike down the president’s sweeping student loan forgiveness program, according to people familiar with the matter.
The high court is expected to issue a decision this month on the plan to eliminate up to $20,000 in federal student debt for millions of borrowers. During oral arguments in February, the court’s conservative majority appeared skeptical that federal law allows the education secretary to wipe an estimated $430 billion in loans from the government’s books.
While White House officials maintain publicly they are confident the Supreme Court will uphold the program, some in the administration have expressed concerns in private that the conservative majority will kill it. Administration officials have been discussing policy options that could help the tens of millions of borrowers who are at risk of not getting the loan forgiveness that Biden promised.
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Editor’s Note: Each week, we will share selections from WSJ Pro that provide insight and analysis we hope are useful to you. The stories are unlocked for The Wall Street Journal’s subscribers.
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Food prices remain much higher than eurozone policy makers would like. A produce stand in Berlin. PHOTO: MICHAEL KUENNE/ZUMA PRESS
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Eurozone slides into recession. The eurozone has slipped into recession as Germany, its largest economy, wobbled, suggesting that the impact of Russia’s war in Ukraine may have been deeper than expected earlier this year.
While the U.S. economy has so far brushed aside higher borrowing rates and continues to grow thanks to robust consumption, employment and an extended market rally, Europe is lagging ever further behind, stuck in the economic equivalent of long Covid. While the U.S. economy is now 5.4% larger than it was before the Covid-19 pandemic struck, the eurozone economy is just 2.2% bigger.
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