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
You Just Received a Federal Grand Jury Subpoena in New Jersey: Now What?
Receiving a federal grand jury subpoena is not something most businesses or individuals anticipate. While it can be concerning, a federal grand jury subpoena does not necessarily mean that you are being accused of wrongdoing. It does, however, mean that a federal criminal investigation is underway and that federal prosecutors believe you may possess information […]
Author: George McGowan
Why Every Business Should Conduct an Annual Insurance Coverage Review
Most New Jersey business owners purchase insurance policies, file them away, and assume they are protected if a claim arises. Without a regular insurance coverage review, many companies discover gaps only after a lawsuit, cyberattack, property loss, or other significant event occurs. An annual insurance coverage review can help businesses identify potential risks, ensure their […]
Author: George McGowan
Demand Letters & Cease and Desist Letters: When to Send One (and When Not To)
Businesses and individuals often encounter situations where another party breaches a contract, fails to pay a debt, or continues harmful conduct. In many such disputes, a precisely drafted demand letter or cease-and-desist letter serves as a powerful legal tool. It can frequently resolve the dispute and avoid litigation. While demand or cease-and-desist letters can resolve […]
Author: George McGowan
How to Effectively Use Contracts to Manage Risk
Key provisions in your contracts, including those relating to indemnification, insurance, and defense, are essential to contract risk management. While sometimes considered “boilerplate,” these provisions play a pivotal role when determining which party is responsible for certain costs and liabilities. They must always be negotiated and drafted carefully. Indemnification Clauses Businesses should never overlook the […]
Author: George McGowan
Understanding Portability for Estate and Gift Tax
Portability of estate and gift tax enables a surviving spouse to inherit any unused portion of their deceased spouse’s federal estate and gift tax exemption. So, if one spouse doesn’t utilize their full exemption, the surviving spouse can effectively double their exemption amount with regard to estate tax liability. For married couples, portability offers a […]
Author: Marc J. Comer
Pet Trusts in New Jersey and New York: A Practical Estate Planning Tool
For many of us, pets are more than companions—they are members of the family. Yet they are often overlooked or inadequately provided for when it comes to estate planning. A pet trust offers a legally enforceable way to ensure that your animal continues to receive proper care if you become incapacitated or pass away. As […]
Author: Marc J. Comer
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.