Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Momentive Faces Criticisms As It Heads To Bankruptcy Court
Author: Joel R. Glucksman
Date: August 26, 2014
Key Contacts
Back
Apollo Global Management-owned silicone and quartz producer Momentive Performance Materials recently began a week of bankruptcy hearings to determine whether its plan to shed $3 billion of debt will be approved.
Momentive filed for protection under Chapter 11 of the bankruptcy law in April after failing to turn a profit since its acquisition by Apollo in 2006, according to Bloomberg.
The New York-based company filed for bankruptcy with an agreement to transfer control to one class of bondholders, despite strong opposition from other creditors, Reuters reported. The deal hinges on a $1.3 billion loan from JPMorgan Chase & Co. and a rights offering to holders of second-lien bonds worth $600 million. This would allow the second-lien bondholders to receive Momentive’s equity.
While a large number of the company’s other creditors are strongly opposed to the deal as it stands now, most rest on a few lines of the contract, the news source explained. If Bankruptcy Judge Robert Drain sides with creditors in his interpretation of these lines early on, the rest of the four days set aside for bankruptcy hearings may be obviated.
The main objection comes from Momentive’s junior bondholders, led by U.S. Bank NA, according to Reuters. These creditors would recover nothing under the plan. U.S. Bank is owed approximately $382 million, and says that it cannot be put behind other creditors in the payback line. Momentive is citing contract language that puts the bank’s debt behind other creditors, but U.S. Bank maintains that this clause only applies to senior secured lenders. If Drain sides with U.S. Bank, Momentive will have to start work an a new plan of restructuring.
Some creditors have also noted that Apollo Global Management is getting a so-called “sweetheart” deal in this bankruptcy, as it owns Momentive and holds some of its second-lien debt.
“It’s like doing a deal with your wife,” a source told Reuters. “If the other side wins, you still win.”
- Practices: Bankruptcy & Creditors' Rights, Corporate Transactions & Business, Bankruptcy Litigation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
SPACs Are Back, What You Need to Know
Special purpose acquisition companies (better known as SPACs) appear to be making a comeback. SPAC offerings for 2025 have already nearly surpassed last year’s totals, with additional transactions in the pipeline. SPACs last experienced a boom between 2020–2021, with approximately 600 U.S. companies raising a record $163 billion in 2021. Notable companies that went public […]
Author: Dan Brecher
Short Form Merger: Streamlining the Process for Businesses
Merging two companies is a complex legal and business transaction. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process that involves important corporate governance considerations. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process. However, […]
Author: Dan Brecher
Tariff Response Options for Small Businesses Facing Financial Distress
The Trump Administration’s new tariffs are having an oversized impact on small businesses, which already tend to operate on razor thin margins. Many businesses have been forced to raise prices, find new suppliers, lay off staff, and delay growth plans. For businesses facing even more dire financial circumstances, there are additional tariff response options, including […]
Author: Brian D. Spector
Common Causes of Partnership Disputes and How to Resolve Them
Business partnerships, much like marriages, function exceptionally well when partners are aligned but can become challenging when disagreements arise. Partnership disputes often stem from conflicts over business strategy, financial management, and unclear role definitions among partners. Understanding Business Partnership Conflicts Partnership conflicts place significant stress on businesses, making proactive measures essential. Partnerships should establish detailed […]
Author: Christopher D. Warren
Businesses Are Facing Financial Headwinds—A Practical Guide
*** The original article was featured on Bloomberg Tax, April 28, 2025 — As a tax attorney who spends much of my time helping people and companies who have large, unresolved issues with the IRS or one or more state tax departments, it often occurs to me that the best service that I can provide […]
Author: Scott H. Novak
President Trump's Termination of Member Gwynne Wilcox
On January 28, 2025, the Trump Administration terminated Gwynne Wilcox from her position as a Member of the National Labor Relations Board (NLRB or the Board). Gwynne Wilcox, a union side lawyer for Levy Ratner, was confirmed to the Board for an original term in 2021 and confirmed again for a successive five-year term expiring […]
Author: Matthew F. Mimnaugh
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.