MPM Silicones Files for Chapter 11May 6th, 2014 by DWM Magazine
MPM Silicones filed for Chapter 11 bankruptcy on April 13, 2014 in the U.S. Bankruptcy Court in the Southern District of New York. The company has quite a pedigree of ownership according to court documents. “MPM Silicones is a wholly-owned subsidiary of Momentive Performance Materials US Inc., which is a wholly-owned subsidiary of Momentive Performance Materials USA Inc. which is a wholly owned subsidiary of Momentive Performance Materials Inc., which is a wholly owned subsidiary of Momentive Performance Material Holdings Inc., which is a wholly owned subsidiary of MPM TopCo LLC, which is a wholly owned subsidiary of Momentive Performance Material Holdings LLC.” Court documents also state that Apollo Funds, New York, NY, holds 90.4 percent of the total shares of Momentive Performance Materials Holdings LLC’s equity interests.
These same documents say that the debtor estimates that funds will be available for distribution to unsecured creditors. Estimated assets and liabilities are both listed at more than $1 billion. The 50 largest unsecured creditors include GE Capital Equity Investments, The Bank of New York Mellon, Nippon Kasei Chemicals Co. Ltd., BASF Corp. and Praxair Inc.
On April 14, Momentive Performance Materials Inc. announced that it has entered into a Restructuring Support Agreement (RSA) with certain of its key stakeholders regarding the terms of a balance sheet restructuring plan “that will strengthen the Company’s financial position by reducing long-term debt and enhancing liquidity. The key terms of the RSA include a $600 million rights offering, which will provide a significant equity infusion to the Company, along with the securing of commitments for $1.3 billion of exit financing. The RSA has been supported by holders owning approximately 85 percent of the company’s Second Lien Notes. To implement this “pre-negotiated” plan, MPM and its U.S. subsidiaries today voluntarily filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code.”
All of MPM’s silicones and quartz businesses will continue to operate in the ordinary course throughout the Chapter 11 process, according to the statement. MPM’s operations outside the U.S. are not included in the Chapter 11 proceedings. “The filing relates solely to MPM and not to Momentive Specialty Chemicals Inc. (MSC), which has a fully independent debt capital structure and a separate and strong balance sheet. MSC had liquidity of $773 million as of December 31, 2013 and has no material debt maturities prior to 2018.”
“The actions we are announcing today represent an important and positive step forward in our efforts to strengthen MPM’s financial condition,” said Craig O. Morrison, chairman, president and CEO of MPM. “With the support of certain of our key stakeholders, we intend to move quickly to implement our pre-negotiated balance sheet restructuring plan, which will eliminate more than $3 billion of debt from MPM’s balance sheet and result in post-emergence liquidity of more than $300 million and net debt of approximately $1.2 billion. This will free up additional cash flow that, among other things, can be invested in growth opportunities, capital expenditures, research and development and technology enhancements.”
“I would like to thank the financial institutions that have provided us with fully committed debtor-in-possession and exit financings,” he added. “These financings will provide us with financial flexibility throughout the reorganization process to operate reliably with significant liquidity of more than $300 million, as well as visibility on MPM’s balance sheet and liquidity post-emergence. In addition, I would like to thank the second-lien creditors that have agreed to equitize their entire debt positions and invest significant incremental equity in MPM.”