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Momentive Performance Materials Files For Bankruptcy

Industry: Silicones maker is faced with large debt it can’t repay

by Marc S. Reisch
April 17, 2014

Facing millions of dollars in debt payments it cannot continue to make, silicones maker Momentive Performance Materials has filed for reorganization in U.S. Bankruptcy Court in White Plains, N.Y.

Creditors have already agreed on a reorganization plan that, according to CEO Craig Morrison, “will eliminate more than $3 billion of debt from Momentive’s balance sheet.” Momentive, which had a net loss of $464 million on sales of $2.4 billion in 2013, expects to emerge from bankruptcy at the end of the year.

Much of Momentive’s debt dates back to 2006 when the private equity firm Apollo Global Management acquired the silicones business from General Electric for $3.2 billion. Momentive, tied with Wacker Chemie as the number two silicones maker after Dow Corning, has struggled to pay down debt ever since.

In a letter to suppliers about the bankruptcy filing, Momentive explains that repaying debt had become difficult because of weak demand in certain markets and overcapacity in the silicones industry. After news of talks with creditors in early April, Moody’s Investors Service lowered its ratings on the firm’s debt. It noted a sharp decline in financial performance beginning in late 2011.

Slow silicone demand from key industries such as construction and electronics, exacerbated by poor growth in Asia, has hurt Momentive, says John P. Rogers, Moody’s senior vice president. Nothing dramatic happened to force the bankruptcy, “but they have been burning through a lot of cash,” he says.

Momentive and its sister company Momentive Specialty Chemicals, a maker of thermoset resins, canceled an initial public offering of stock in 2012. The specialty chemical company is not included in the bankruptcy filing.


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