Maker of silicone products used in caulk, adhesive labels, foam products, cosmetics and tires, as well as quartz, Momentive Performance Materials Inc., has filed for Chapter 11 bankruptcy after struggling to make payments on debt dating back to its buyout by Leon Black’s Apollo Global Management LLC for $3.8 billion.
In the bankruptcy filing the company listed $2.69 billion in assets and $4.17 billion in debt. It hasn’t posted an annual profit since it was purchased in 2006.
Once Part of General Electric Co.
Momentive was once General Electric Co.’s advanced-materials unit. In 2010 Apollo combined Momentive with Hexion Specialty Chemicals, thus creating Momentive Performance Materials Holdings LLC. The following year the company filed for an initial public offering.
“We intend to move quickly to implement our pre-negotiated balance sheet restructuring plan, which will eliminate more than $3 billion of debt,” said Craig Morrison, chairman and chief executive officer of Momentive.
Restructuring Needs Met
JP Morgan Securities LLC is the lead arranger and the company has a $570 million commitment in debtor-in-possession financing. The financing and cash generated from the company’s operations will help it meet its needed operational and restructuring necessities.
According to the bankruptcy statement, Momentive Specialty Chemicals has a “fully independent debt capital structure and a separate and strong balance sheet.”
Overcapacity to Blame
“Overcapacity in its industry sector” hindered Momentive’s ability to keep up with debt payments, said company spokesman, John Kompa. While its quartz business had been hurt by weak demand for semiconductors.
In 2012 Momentive’s net loss was $365 million. Momentive’s credit rating was cut to the fourth-lowest junk grade, as a result of “dim” prospects of being able to avoid a default or debt restructuring.
For information and guidance on Chapter 11 bankruptcy, you need the experts at Resnik Hayes Moradi LLP.
Source: Bloomberg, Apollo’s Momentive Performance Files for Bankruptcy, April 14, 2013