(Reuters) - Drugmaker Mallinckrodt (OTC:MNKKQ) is talking to hedge funds about filing for bankruptcy and avoiding payments intended to help people addicted to opioids, the Wall Street Journal reported on Wednesday.
Shares of the company rose 53.3% to 69 cents in afternoon trade.
As part of a prearranged deal, Mallinckrodt will propose to write off about $1 billion from what it still owes to addiction victims and state and local governments, while making a one-time payment of roughly $250 million, the report said, citing people familiar with the discussions.
Mallinckrodt did not immediately respond to a Reuters request for comment.
A group of hedge funds, including Greenwich and Silver Point Capital, is in negotiations with Mallinckrodt's board to give them control of the business through a bankruptcy filing, according to people familiar with the discussions, the report said.
Mallinckrodt, which is one of the largest manufacturers for opiods, had filed for bankruptcy protection nearly three years ago. It reached a $1.7 billion nationwide settlement as part of its bankruptcy reorganization plan and emerged from Chapter 11 last year.
The company in June said it was considering a second bankruptcy filing and other options after its lenders raised concerns over the $200 million payment related to opioid-related litigation.