Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Momentive Performance preparing for filing protection under chapter 11
Author: Joel R. Glucksman
Date: April 17, 2014
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Momentive Performance Materials, Inc. said on April 1 that it is meeting with stakeholders to discuss the restructuring of its debt before it files for protection under Chapter 11 of the bankruptcy law, according to Reuters. The silicon and quartz producer held total liabilities of $4.14 billion as of Sept. 30, the company said in a filing with the U.S. Securities and Exchanges Commission. On March 31, Momentive Performance said that it was unable to file its annual report for the period ending Dec. 31.
The company expects to continue business after the filing, but does not plan to make a $60 million interest payment on its debt due mid-April, according to The Wall Street Journal. Momentive Performance was purchased by Apollo Global Management LLC in a $3.8 billion leveraged buyout in 2006 that left the company saddled with more debt. The subsequent recession, which caused an oversupply in the silicon industry, also contributed to the company’s financial woes.
Momentive Performance’s affiliate, Momentive Specialty Chemicals, Inc., isn’t experiencing financial difficulties, and will not be a part of the filing, the company said in an April 1 statement, according to the news source.
This Chapter 11 filing would be the largest such case so far in 2014, marking one of the biggest failures of a leveraged buyout in recent history, the Journal explained. A number of pre-recession buyouts led to strong returns for their private-equity owners, others have experienced real financial troubles. Sources told the news source that Apollo, which is also a creditor, plans to retain a stake in the company. Along with some other creditors, Apollo will be pumping $550 million to $600 million into Momentive Performance. The restructuring is anticipated to reduce Momentive’s debt to about $1.3 billion.
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