Apollo Global Management LLC’s Momentive Performance Materials Inc. got closer to winning creditor approval for its bankruptcy plan as two key lender groups said they were ready to throw their votes behind it.
Over the weekend, after four contentious days of hearings, holders of certain senior debt asked to change their votes from no to yes, Stephen Moeller-Sally, an attorney for the debtholders’ trustee, Wilmington Trust NA, told U.S. Bankruptcy Judge Robert Drain at a hearing today in White Plains, New York.
Another group of senior lenders is also nearing acceptance of the plan, which is backed by Leon Black’s Apollo and seeks to reduce a $4 billion debt load at the maker of silicone and quartz products. Drain gave the parties another day to resolve disputes and said he would reconvene tomorrow to consider confirming the plan.
Both lender groups, known as the first-lien and 1.5-lien noteholders, had objected to part of the plan that would deprive them of a premium for early redemption of their holdings. Instead, they would recover their investment plus accrued interest in cash. Momentive has said in an earlier court filing that the “make-whole” premium would have amounted to more than $200 million.
By acquiescing, the senior noteholders will get full payment in cash plus accrued interest, without the make-whole premium. Had they continued to resist, they would have wound up with new debt, including the make-whole premium if Drain decided it was warranted.
Drain let the holdout creditors see where things were headed last week, when he grew impatient with the wrangling.
“This is a bunch of lawyers standing around avoiding an obvious solution,” Drain told their lawyers at an Aug. 22 hearing. “You know most people when offered payment in cash take it.”
The holders “have taken your honor’s statements at the hearing on Friday and from the proceedings from last week under advisement and made a good-faith determination to change their vote and make it consensual,” Moeller-Sally said.
Momentive told the judge today that they want to hear his ruling on whether he will confirm the plan.
“We offered this up as part of the plan and it was rejected,” said Matthew Feldman, an attorney for Momentive, referring to the cash payment. There’s no cause to change their vote “other than they think they are going to lose,” he said.
Drain stopped the hearing to discuss the vote-switch in his chambers, before saying he would delay his rulings until tomorrow.
The “day is to be spent negotiating, not litigating, not preparing for some sort of hearing” on the request to change votes, Drain said.
If the senior lenders and Momentive reach a deal, Drain still must decide whether to confirm the plan and address an effort by the noteholder with the lowest payment priority to get recoveries at the expense of those above them.
The Waterford, New York-based company filed for bankruptcy protection in April after struggling to meet payments on debt dating to its $3.8 billion buyout by Apollo in 2006. The proposed plan would cut debt to as little as $1.3 billion.
Its $250 million of 10 percent notes due 2020 closed at 97 cents on the dollar today after trading as low as 92.9, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The notes traded above par on Aug. 21.
The debtor’s $1.1 billion of 8.875 percent notes due 2020 dropped to 98.1 cents on the dollar today after trading Aug. 22 at 98.5, according to Trace.
The case is In re Momentive Performance Materials Inc., 14-bk-22503, U.S. Bankruptcy Court, Southern District of New York (White Plains).