Specialty chemical maker Hexion has filed for Chapter 11 bankruptcy protection and signed an agreement with creditors allowing it to strengthen its balance sheet and finance its operations.
Hexion, which is controlled by the private equity firm Apollo Global Management, is carrying $3.7 billion in debt. The thermoset resins specialist had sales of $2.9 billion and a net loss of $52 million in the first nine months of 2018.
Earlier this year, S&P Global Ratings downgraded Hexion’s credit because of debt due over the short term. S&P was particularly worried about loan covenants that could trigger early maturity of some of the company’s debt.
Hexion has been trying to reduce debt. In 2016 it sold an adhesive and coating resins business to Synthomer for $226 million. Last year it sold an additive business to Munzing Chemie for about $50 million.
A year ago, Hexion revealed it wanted to divest a portion of its epoxy, phenolic, and coating resins segment, but it has yet to find a buyer. The segment is responsible for more than half of Hexion’s sales. The balance comes from its forest products business, which makes formaldehyde-based resins and other binders for wood products.
Hexion has signed a restructuring agreement with creditors that will reduce its debt by $2 billion, inject $300 million in new equity, and finance operations.
“We believe that with a stronger balance sheet, Hexion will be better positioned to further invest in our specialty product portfolio and capitalize on positive industry growth,” CEO Craig A. Rogerson says.
Hexion was formed in 2005 through the merger of the Apollo-owned companies Borden Chemical, Resolution Performance Products, and Resolution Specialty Materials. Hexion attempted to buy Huntsman in 2008 but later walked away. It later tried merging with another Apollo-controlled firm, Momentive Performance Materials. Momentive declared bankruptcy in 2014 and is now being acquired by a South Korean consortium.