By Yasin Ebrahim and Senad Karaahmetovic
Investing.com -- Johnson & Johnson (NYSE:JNJ) said Wednesday its subsidiary LTL Management has re-filed for Chapter 11 bankruptcy protection just months after an appeals court rejected its "Texas two-step" process to settle lawsuits that allege its talc products caused cancer.
Shares of the company are up over 3% in pre-market Wednesday.
Chapter 11 is needed to move ahead with a reorganization plan that includes a commitment to pay up to a present value of $8.9 billion, over 25 years, to settle all current and future talc claims, J&J said. The amount represents an increase of $6.9B over the $2B previously committed related to LTL's initial bankruptcy filing in October 2021, the company said. More than 60,000 current claimants support a global resolution on these terms, it added.
Johnson and Johnson created a subsidiary LTL Management and placed it into bankruptcy -- a Texas two-step strategy -- to deal with tens of thousands of legal claims alleging its talc caused cancer. But earlier this year in January, a U.S. appeals court dismissed the Chapter 11 petition filed as the subsidiary wasn't in financial distress.
The company reiterated that "neither LTL's original filing nor this re-filing is an admission of wrongdoing, nor an indication that the company has changed its longstanding position that its talcum powder products are safe."
Bank of America analysts said the news is encouraging, however, the final outcome is still uncertain.
"It’s unclear to us at this time whether the current proposal will ultimately be accepted by the court and claimants given a much higher anticipated value above the $10B range, according to the court filings."
Morgan Stanley analysts believe this development is "an incremental positive for the stock."
"At this point we don't see the litigation as a material risk to the company, but we've noted that it is likely to remain an overhang on the stock given the range of potential outcomes. JNJ has a strong balance sheet ($24bn cash as of 4Q22)," they wrote in a note.