in this issue
Momentive Performance Materials considers bankruptcy filing
2:05 PM MDT | April 4, 2014 | Robert Westervelt
Momentive Performance Materials (MPM; Albany, NY), the silicones and quartz subsidiary of Momentive, is considering a bankruptcy filing as part of ongoing negotiations to reduce debt. “As part of this process, a filing under Chapter 11 of the US Bankruptcy Code may provide the most expeditious manner in which to effect a plan of reorganization,” MPM said in a regulatory filing on 1 April. MPM said it “believes these discussions will be concluded shortly.”
MPM had outstanding long-term debt of $3.2 billion as of 30 September 2013. “MPM is in active discussions regarding alternatives to modify its capital structure and strengthen its balance sheet in order to create a sustainable business for the long term and resolve any doubts about its ability to continue as a going concern,” MPM said in a statement. “MPM has a substantial amount of institutional debt, the payment of which has become difficult due to continued weakness in demand and overcapacity in its industry sector.”
MPM said in the filing that it expects to report a net loss of approximately $465 million for 2013, compared to the net loss of $365 million reported in 2012. The increase in expected net loss is primarily driven by non-cash adjustments related to concerns about its ability to continue as a going concern, MPM says. MPM expects to report net sales of approximately $2.4 billion for 2013, up 1.7% from 2014. Additionally, MPM expects to report operating income of approximately $30 million, compared to an operating loss of $39 million reported in 2012. “The increase in operating income was primarily due to the increase in net sales, as well as decreases in selling, general and administrative expense, as well as a decrease in restructuring and other one-time costs,” MPM says.
Momentive says the "MPM actions would not involve Momentive Specialty Chemicals Inc., which has a separate and strong balance sheet and operates independently of MPM.” Private equity film Apollo Management controls both MPM and Momentive Specialty Chemicals. Apollo acquired MPM, the former GE Silicones, from GE for $3.8 billion in 2006.
Law firm Dechert (New York) says that “holders of a substantial portion” of MPM’s $1.1-billion 8.875% first lien notes due 2020 have selected it as counsel in connection with any potential restructuring of the company.