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J & J seeks to bankrupt talc debt, sources say

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July 19, 2021

Johnson & Johnson According to seven people familiar with the matter, is seeking plans to move debt from a wide range of baby powder proceedings to a newly created business and seek bankruptcy protection.

J & J has not yet decided whether to pursue a bankruptcy plan and may eventually abandon that idea-Reuters

During the settlement discussion, one of the healthcare conglomerate lawyers could be the plaintiff’s lawyer and J & J could pursue a bankruptcy plan, resulting in lower payments if not settled in advance. Said. Plaintiffs’ lawyers cannot initially prevent J & J from taking such action, but can later pursue legal means to challenge it.

Some have said that J & J has not yet decided whether to pursue a bankruptcy plan and may eventually abandon that idea. Reuters was unable to determine if J & J had a restructuring lawyer to help the company consider a bankruptcy plan.

J & J faces lawsuits from tens of thousands of plaintiffs alleging that baby powder and other talc products contain asbestos and caused cancer. Plaintiffs include women who suffer from ovarian cancer and other women who fight mesothelioma.

“Johnson & Johnson Consumer Inc. has not determined any particular course of action in this proceeding other than keeping talc safe and filing these proceedings in the tort system, as the pending proceedings indicate. “The company’s talc products were stated in a statement provided to Reuters.” J & J declined further comments.

If J & J continues, unreconciled plaintiffs could probably go into long-term bankruptcy proceedings with a much smaller company. Future payments to plaintiffs will depend on how J & J decides to fund the entity with talc debt.

J & J is currently considering using the Texas “split merger” method. This allows the company to be split into at least two entities. For J & J, some said it could create a new entity containing talc debt filing for bankruptcy to suspend the proceedings.

This operation is known among legal professionals as Texas’s two-stage bankruptcy. This is a strategy recently used by other companies facing asbestos proceedings.

In addition to Texas law, J & J could consider using another mechanism to file a bankruptcy filing, some said.

According to a 2018 Reuters survey, J & J has known for decades that asbestos, a known carcinogen, lurks in baby powder and other cosmetic talc products. The company stopped selling baby powder in the United States and Canada in May 2020. This is partly due to “wrong information” and “unfounded claims” about talc-based products. J & J has confirmed that consumer talc products are safe and free of asbestos through thousands of tests.

With a market value of about $ 434 billion, the best-in-class companies face lawsuits from more than 30,000 plaintiffs claiming that talc products are unsafe. In June, the US Supreme Court rejected J & J’s appeal against a Missouri court ruling and inflicted $ 2 billion in damages on a woman who claimed that the company’s talc caused ovarian cancer.

Plaintiffs’ lawyers consider the two-step bankruptcy strategy to avoid potentially expensive settlements or judgments. Companies see it as a way to enclose multiple proceedings in one court for efficient negotiations where bankruptcy law provides for asbestos liability. A non-bankrupt company can reach a funding agreement with an entity navigating a court restructuring to cover future settlements.

In 2017, Brawny paper towel maker Georgia-Pacific used Texas law to transfer asbestos debt to an entity that later filed for bankruptcy in North Carolina.

Bankruptcy cases filed to resolve proceedings, including those related to asbestos, often take years and rarely pay creditors in full. For example, OxyContin maker Purdue Pharma LP has nearly settled thousands of opioid cases after two years of bankruptcy negotiations with plans worth more than $ 10 billion to deal with trillions of dollars in claims. I’m trying.

Another company, DBMP LLC, filed for bankruptcy last year to settle its asbestos debt, saying the proceedings could take up to eight years, according to the company’s press release.

J & J is also facing a lawsuit alleging that it has contributed to the opioid epidemic in the United States, and recently some of certain spray sunscreen products contain low levels of benzene (another carcinogen). After discovering, I recalled it.

In June, the company agreed to pay $ 263 million to resolve opioid claims in New York. Denied cheating related to opioids.

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J & J seeks to bankrupt talc debt, sources say

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