Momentive noteholder trustees object to proposed releases under plan

By Kali Hays

New York, July 29 – Wilmington Trust, NA and the Bank of New York Mellon, indenture trustees’ for Momentive Performance Materials Inc.’s 1.5-lien note claims and 10% senior secured notes due 2020 respectively, objected to confirmation of the company’s proposed joint plan of reorganization, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, Momentive received court approval of the disclosure statement related to its reorganization plan on June 19.

The indenture trustees claim that Momentive’s plan is not supported by sufficient evidence on its feasibility and that it lacks clarification as to the right of the indenture trustee to pursue intercreditor claims.

Specifically, the objection says that the plan grants certain stakeholders, including Momentive’s controlling shareholder Apollo Global Management, LLC, “sweepingly broad third-party releases.”

Such releases are outside the jurisdiction of the Bankruptcy Court and “would impermissibly extinguish the 1.5-lien indenture trustee’s state law causes of action for breach of contract against Apollo and certain other junior lenders, which claims are the subject of pending intercreditor litigation,” the objection stated.

The parties went on to claim that because the proposed plan provides for the releases to be effective only to the extent permissible by law, Apollo and “its fellow backstop parties are evidently willing to go forward with the proposed plan even if the release terms are stricken.”

Moreover, the objection said that the plan assumes those holders of 1.5-lien notes that vote to accept the plan as having consented to the releases and have no ability to opt out of the releases and no certainty they will receive cash treatment under the plan.

Wilmington Trust and the New York Bank Mellon asked that Momentive’s plan be denied and that an amended plan be submitted based on the objections.

A hearing is scheduled for Aug 18.

Momentive, a silicones and advanced materials company based in Albany, N.Y., filed bankruptcy on April 13. The Chapter 11 case number is 14-22503.

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