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
Why Secured Transactions Are Important
Secured transactions form the backbone of a wide range of business dealings, including business loans, mortgages, and inventory financing. Because the stakes are often high and relatively minor oversights can have drastic consequences, lenders and borrowers should thoroughly understand how to form an enforceable security agreement that protects their legal rights. What Is a Secured […]
Author: Dan Brecher
Don’t Cash a “Paid in Full” Check Without Understanding the Legal Implications
Cashing a check marked “paid in full” can be a risky endeavor, particularly if you don’t fully understanding the legal implications. If you are owed more than the amount of the check you accept and deposit, you may waive your right to collect the full disputed amount. That is why you should consider either rejecting […]
Author: Dan Brecher
Changes to Qualified Small Business Stock Will Benefit Startup Founders and Investors
The One Big Beautiful Bill Act of 2025 (OBBBA) significantly impacts federal taxes, credits, and deductions. A key change relating to Qualified Small Business Stock (QSBS) allows greater tax-free gains for investments in startups and other qualifying small businesses. Company founders and other investors should understand how the enhanced tax strategy works or risk missing […]
Author: Dan Brecher
Corporate Consolidation and Antitrust Issues in Mergers
Corporate consolidation involves two or more businesses merging to become a single larger entity. The result is often a stronger and more competitive company that can better navigate today’s competitive marketplace. What Is Corporate Consolidation? Corporate consolidation closely resembles a basic merger transaction. The primary difference is that a consolidation creates an entirely new business […]
Author: Dan Brecher
What is Business Law and Why Is it Important?
Business law plays a critical role in nearly every aspect of running a successful enterprise, from negotiating a commercial lease to drafting employee policies to fulfilling corporate disclosure obligations. Understanding what is business law and your legal obligations can help your business run smoothly and build productive relationships with clients, business partners, regulators, and others. […]
Author: Dan Brecher
Corporate Transactions: Best Practices for Successful Deals
Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]
Author: Dan Brecher
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.