Momentive’s Bankruptcy Loan Package Approved

bankruptcy court judge has approved a $570 million financing package to get Momentive Performance Materials, maker of silicone and quartz products, through the Chapter 11 protection it filed in April.

Bankruptcy Restructuring Plan

It’s prearranged restructuring plan includes a $600 million rights offering and $1.3 billion in exit loans from JPMorgan Chase & Co, still needs approval by the courts, but had the approval of key stakeholders. JPMorgan also arranged financing in the form of a $300 million loan and a $270 million credit facility. The bulk of that package had already been approved by Judge Robert Drain of U.S. Bankruptcy Court, but unsecured creditors have recently raised some objections.

Unsecured Creditors Objecting

Unsecured creditors, including Aurelius Capital Management, objected to the approval of the deal because of fears that the deal will threaten their recovery. These objections could prove to be a precursor to a potentially contentious battle over Momentive’s restructuring. The creditors are not taking issue with the size or necessity of the loan, but rather to provisions of the deal that they feel might limit their ability to challenge Momentive’s bankruptcy exit plan.

The Objecting Side

Kenneth Klee, a lawyer for the unsecured creditor, told the judge that the provisions are inappropriate in light of the high likelihood of a legal fight over the plan, specifically as to whether Aurelius and other subordinated debtholders are entitled to recovery. He went on to balk at provisions that would pick up some of Apollo’s professional fees (the company is owned by private equity group Apollo Global Management LLC) and set a 90-day limit for the unsecured creditors to launch challenges to certain protections for Momentive’s secured creditors. The judge granted that the unsecured creditors should have the right to request his permission to extend the 90-day window if necessary.

For information and guidance on bankruptcy, you need the experts at Resnik Hayes Moradi LLP.

Source: Reuters, Momentive’s $570 mln bankruptcy loans approved by judge, May 23, 2014

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