05 November 2017

US Corporate Law News: Federal appeals court rules on Momentive Performance Material Inc.'s Chapter 11 repayment plan

Gregory Pun
Associate | US

In the latest development in the long-running bankruptcy matter involving Momentive Performance Materials Inc.'s Chapter 11 reorganization plan, the U.S. Court of Appeals for the Second Circuit found that the U.S. Bankruptcy Court correctly affirmed Momentive's reorganization plan but erred in its determination as to interest rates to be applied to replacement notes issued to the company's creditors. The U.S. Bankruptcy Court previously approved Momentive's initial reorganization plan, finding that (among other things) the issuance of replacement notes with a below market interest rate (determined using the formula established by the U.S. Supreme Court in a separate case (Till v. SCS Credit Corp.)) was appropriate. Momentive's senior creditors disagreed with the U.S. Bankruptcy Court ruling, claiming that it unfairly reduced the value of the notes. On appeal, the Second Circuit affirmed the lower court's approval of the reorganization plan, but concluded that where a market rate for similar debt obligations was ascertainable, such market rate should be applied. The Second Circuit remanded the case to the U.S Bankruptcy Court for the sole purposes of determining whether an ascertainable market rate can be established for the replacement notes and, if so, applying such rate to them. For more information, see: http://www.ca2.uscourts.gov/decisions/isysquery/351c4d8a-b2c1-42a4-abb2-d15c3630f975/5/doc/15-1682_15-1771_opn.pdf

Gregory Pun Associate | Greenwich

Category: Article