Bloomberg News

Apollo’s Momentive Girds for Fight Over Bankruptcy Plan

June 06, 2014

Momentive Performance Materials Inc., a maker of silicones and quartz products owned by Leon Black’s Apollo Global Management LLC (APO:US), is girding for a dispute over the bankruptcy exit plan it wants a judge to confirm in August.

Momentive may face opposition to the plan’s approval at a five-day trial starting Aug. 14, given that litigation with creditors may require a “substantial” investigation, according to court papers filed yesterday. Momentive asked U.S. Bankruptcy Judge Robert Drain to approve a schedule that would wrap up discovery in the cases by July 25.

Discovery should “take place on an expedited timetable,” Momentive said in the filing in White Plains, New York. The company said it began talks with its creditors’ committee to try and speed up document production, deposition of witnesses and other matters.

Momentive in May sued Bank of New York Mellon (BK:US) Trust as trustee for $1.1 billion in 8.875 percent notes due in 2020, and Wilmington Trust NA, as trustee for 10 percent notes due in 2020, saying it didn’t owe those noteholders special premium payments based on unpaid interest.

The company in turn was sued by U.S. Bank NA, a trustee for $382 million of 11.5 percent subordinated notes, which said those securities shouldn’t be treated worse under Momentive’s plan than a different class of debt.

Jefferies Hire

Momentive separately is disputing the creditors’ committee’s plan to hire Jefferies Group LLC as a financial consultant. Under the proposed hiring terms, Jefferies would get a transaction fee only if it consummates a Chapter 11 plan supported by all committee members, including holders of subordinated notes.

“To receive the bulk of its compensation, Jefferies must cater to a minority on the committee,” one that isn’t entitled to any recovery under the rough terms of Momentive’s plan to exit bankruptcy, the company said.

The hiring terms also misalign Jefferies’s incentives with those of the committee, Apollo said in an objection. U.S. Bank and Aurelius Capital Partners LP, which together with affiliates owns $55 million of the subordinated notes, are both on the creditor panel, according to court records.

The Jefferies issue is to be addressed at a hearing set for June 10. A hearing to approve the company’s disclosure statement explaining its Chapter 11 plan is set for June 19.

Momentive, based in Waterford, New York, listed $2.69 billion of assets and $4.17 billion of debt in its Chapter 11 filing in April. The company hasn’t posted an annual profit since Apollo bought it for $3.8 billion in 2006, according to data compiled by Bloomberg.

The case is In re Momentive Performance Materials Inc., 14-bk-22509, U.S. Bankruptcy Court, Southern District of New York (White Plains).

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Stephen Farr, Joe Schneider


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Companies Mentioned

  • APO
    (Apollo Global Management LLC)
    • $23.56 USD
    • 0.23
    • 0.98%
  • BK
    (Bank of New York Mellon Corp/The)
    • $41.29 USD
    • 0.00
    • 0.0%
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