Apollo Global Management LLC’s Momentive Performance Materials Inc. has “dim” prospects of avoiding a default or debt restructuring this year, according to Standard & Poor’s.
S&P cut the manufacturer of specialty chemicals one grade to CCC- with a negative outlook, saying available cash will probably be constrained this year under its debt maintenance requirements, credit analysts Cynthia Werneth and Paul Kurias wrote in a note today. The rating indicates that in adverse conditions the company will likely not be able to “meet its financial commitments.”
Free cash flow has been negative for nine quarters, falling $80 million for the three months ended Sept. 30, the biggest quarterly cash burn since at least 2008, according to data compiled by Bloomberg.
John Kompa, a spokesman for the company, declined to comment on the report.
The silicone maker, which has about $3.3 billion of debt outstanding, reported a net loss of $67 million in the third quarter, making it three years since the company has made money. The private-equity firm headed by Leon Black bought Albany, New York-based Momentive in 2006 for $3.8 billion.
“Prospects for sufficient improvement to stave off a payment default or debt restructuring within the first three quarters of 2014 are dim,” the S&P analysts wrote. “We expect the company to continue to generate negative free operating cash flow, causing liquidity to dwindle.”
Momentive’s $381.9 million of 11.5 percent subordinated notes due December 2016 fell 2 cents to 73 cents on the dollar today to yield 25.5 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That’s down from as high as 86 cents last May.