(Urethanes Technology International Report)
White Plains, New York – Momentive Performance Materials Inc has won conditional court approval of its bankruptcy reorganisation plan.
US Bankruptcy Judge Robert Drain presided over the four-hour 26 August ruling for Apollo Global Management, which took over the New York-based silicone and chemical company for $3.8bn (€2.8bn) in 2006.
Momentive listed $2.69bn in assets and $4.17bn in debt in its Chapter 11 filing in April. The bankruptcy plan was negotiated by Momentive alongside owner Apollo Global Management and a committee representing holders of second-lien secured debt. Most of the reorganised company’s stock would go to holders of $1.34bn in 9% second-lien notes.
Momentive offered senior lenders full repayment in cash but no premium to compensate for early redemption of their notes if they voted in favour of the plan. If they voted against it, they were entitled to replacement liens, not cash.
This week, those lenders said they were willing to drop their opposition after Drain criticised them for not taking the cash. The judge gave them a day to negotiate with the company. They returned to court on 26 August without a settlement.
Drain approved the plan only after the company changed the interest rate of the replacement debt going to the senior lenders. The lender groups known as the first-lien and 1.5-lien noteholders deserved additional interest of 0.5% and 0.75% respectively for the risk they were assuming, Drain said.
He added that senior lenders had no enforceable claim to “make-whole” premiums, which compensate bondholders for lost interest payments when their securities are retired early and would have amounted to about $200m in the Momentive case.
Drain also ruled against a group of holders of one of its lowest tiers of notes – $381.9m in 11.5% senior subordinated notes due 2016 – who argued that their debt should be treated equally to the second-lien noteholders who funded the $600m rights offering. Had Drain sided with the group, led by US Bank NA as indenture trustee, the plan would have required additional changes.
Momentive CEO Craig Morrison said: “Now that the court has indicated that it will confirm our plan, the path is clear for MPM to emerge from Chapter 11 as a stronger and more competitive company."