Trevor Hoffmann in Law360: Momentive Win Shifts Balance Of Power In Ch. 11 Process

05/07/2015

The affirmation of a bankruptcy plan orchestrated to salvage a bad buyout for Momentive Performance Materials Inc. tips the playing field in Chapter 11 away from secured creditors that usually wield the most power and toward private equity sponsors eager to preserve equity stakes.

Monday’s decision upholding Momentive’s $3 billion debt-cutting strategy will be felt across the commercial lending industry, and lawyers expect it to encourage the development of Chapter 11 plans that propose harsh restructuring terms for senior creditors...

“If you’re going to go with that method, the decision makes clear that the judge has some leeway or latitude to determine what base rate to employ and then to determine the appropriate risk premium," said Trevor Hoffmann of Haynes and Boone LLP. "That’s obviously a scary thing for secured creditors.”

Excerpted from Law360. To read the full article, click here (subscription required).

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